One possible means of determining the difference between absorption and variable costing based operating incomes is
A)to add fixed manufacturing cost to the variable costing operating income.
B)by subtracting the variable overhead rate from the fixed overhead rate and then multiplying the difference by the number of units in inventory.
C)by subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory.
D)by multiplying the number of units produced by the budgeted fixed manufacturing overhead rate.
E)by adding fixed manufacturing overhead in beginning inventory to income.

Question

Quizplus · Accepted Answer

The difference between absorption and variable costing operating incomes is due to the treatment of fixed manufacturing overhead. Under absorption costing, fixed manufacturing overhead is included in inventory costs, while under variable costing, it is expensed in the period incurred. Therefore, the difference in operating income can be determined by the change in fixed manufacturing overhead in inventory.

One Possible Means of Determining the Difference Between Absorption and Variable