If the number of units produced in a period is larger than the number of units sold in a period, absorption costing income will be higher than variable costing income.

Question

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Absorption costing includes fixed manufacturing overhead in the cost of goods sold, while variable costing only includes variable costs. If more units are produced than sold, absorption costing will allocate more fixed costs to the inventory, resulting in a higher income than variable costing.

If the Number of Units Produced in a Period Is