When the number of units sold exceeds the number of units produced,net income under variable costing ________ net income under absorption costing.
A) is less than
B) exceeds
C) equals
D) not enough information to determine

Question

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing overhead is expensed in the period incurred, whereas under absorption costing, it is allocated to units produced. When units sold exceed units produced, some of the fixed overhead costs remain in inventory under absorption costing, leading to lower expenses and higher net income compared to variable costing.

When the Number of Units Sold Exceeds the Number of Units