When there are no units in the beginning finished goods inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in the cost of goods sold only when the units are sold, which can defer some expenses to future periods. This can result in higher operating income compared to variable costing, where all fixed manufacturing overhead is expensed in the period incurred.

When There Are No Units in the Beginning Finished Goods