Net income reported under absorption costing will exceed net income reported under variable costing for a given period if:
A)production equals sales for that period.
B)production exceeds sales for that period.
C)sales exceed production for that period.
D)variable overhead exceeds fixed overhead for that period.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in the cost of inventory. If production exceeds sales, some of the fixed overhead costs are deferred in inventory, leading to higher net income compared to variable costing, where all fixed overhead is expensed in the period incurred.

Net Income Reported Under Absorption Costing Will Exceed Net Income