If the number of units produced is more than the number of units sold,which of the following statements is true when comparing operating profit under absorption versus variable costing?
A)Variable costing will produce a higher operating profit.
B)Absorption costing will produce a higher operating profit.
C)Operating profit is the same under both methods.
D)Sales revenue will be less when absorption costing is used.
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead costs are allocated to the cost of each unit produced. When production exceeds sales, some of these costs are deferred in inventory, leading to a higher operating profit compared to variable costing, where all fixed manufacturing overhead costs are expensed in the period they are incurred.

If the Number of Units Produced Is More Than the Number