When production is less than sales volume, income under absorption costing will be ____ income using variable costing procedures.
A) greater than
B) less than
C) equal to
D) randomly different than

Question

Quizplus · Accepted Answer

When production is less than sales volume, absorption costing will allocate a portion of fixed manufacturing overhead to each unit produced. This means that the cost of goods sold under absorption costing will be higher than under variable costing since fixed costs are being included in the cost of goods sold. As a result, income under absorption costing will be less than income under variable costing procedures.

When Production Is Less Than Sales Volume, Income Under Absorption