If production exceeds units sold,which of the following is TRUE concerning income?
A)A higher operating income will result under a variable costing income statement.
B)A lower operating income will result under an absorption costing income statement.
C)The same operating income will result under both a variable costing and absorption costing income statement.
D)A higher operating income will result under an absorption costing income statement.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is allocated to units produced, so if production exceeds sales, some of the fixed costs are deferred in inventory, resulting in higher operating income compared to variable costing, where all fixed costs are expensed in the period incurred.

If Production Exceeds Units Sold,which of the Following Is TRUE