When comparing the operating incomes between absorption costing and variable costing, and beginning finished inventory exceeds ending finished inventory, it may be assumed that
A)sales increased during the period.
B)variable cost per unit is less than fixed cost per unit.
C)absorption costing income exceeds variable costing income.
D)variable costing income exceeds absorption costing income.
E)variable costing income equals absorption costing income.

Question

Quizplus · Accepted Answer

When beginning finished inventory exceeds ending finished inventory under absorption costing, more fixed manufacturing overhead costs are assigned to the units in ending inventory than to units sold in the period. This results in absorption costing income being higher than variable costing income. Therefore, D is the correct choice.

When Comparing the Operating Incomes Between Absorption Costing and Variable