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.

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Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are included in product costs, whereas under absorption costing, both variable and fixed manufacturing costs are included. When units produced are more than units sold, absorption costing allocates some fixed costs to the ending inventory, reducing the cost of goods sold and potentially increasing operating income compared to variable costing, where all fixed costs are expensed in the period incurred.

When There Are No Units in the Beginning Finished Goods