If inventory has grown, operating income will be higher under absorption costing than it is under variable costing.

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Under absorption costing, fixed manufacturing overhead costs are included in the cost of inventory and expensed as cost of goods sold when units are sold. Therefore, if inventory has grown, a larger portion of fixed manufacturing overhead costs will be deferred to future periods, resulting in higher operating income under absorption costing compared to variable costing.

If Inventory Has Grown, Operating Income Will Be Higher Under