When all of the units produced are sold,the operating income is the same under both the absorption and variable costing methods.Assume no beginning and ending inventories.Which of the following gives the correct reason for the above statement?
A) All costs incurred have been recorded as expenses.
B) A portion of the fixed manufacturing overhead is still in the Finished Goods Inventory account.
C) All selling and administrative expenses have been recorded as period costs.
D) Fixed manufacturing costs have not been considered when calculating the operating incomes.

Question

Quizplus · Accepted Answer

When all units produced are sold, there are no beginning or ending inventories. Therefore, all costs incurred (including fixed and variable manufacturing costs) are recorded as expenses in the period they were incurred, regardless of the costing method used. As a result, operating income is the same under both absorption and variable costing methods.

When All of the Units Produced Are Sold,the Operating Income