What factor related to manufacturing costs causes the difference between operating income computed using absorption costing and operating income computed using variable costing?
A)Absorption costing expenses all costs, whether fixed or variable.
B)Absorption costing "inventories" all direct manufacturing costs.
C)Absorption costing "inventories" all fixed manufacturing costs.
D)Absorption costing "inventories" all fixed manufacturing and period costs.

Question

Quizplus · Accepted Answer

Absorption costing "inventories" all fixed manufacturing costs, meaning that these costs are included in the cost of goods sold calculation. However, variable costing only includes variable manufacturing costs in the cost of goods sold calculation. This difference in cost allocation causes a difference in operating income between the two methods.

What Factor Related to Manufacturing Costs Causes the Difference Between