Assuming more items are sold during a period than are produced in that same period, which of the following will result?
A) Net income using the absorption costing method will be equal to net income using the variable costing method.
B) Net income using the absorption costing method will be less than net income using the variable costing method.
C) Net income using the absorption costing method will be greater than net income using the variable costing method.
D) Net income using the absorption costing method will be randomly different from net income using the variable costing method.

Question

Quizplus · Accepted Answer

When more units are sold than produced, the fixed manufacturing overhead cost per unit under absorption costing will be lower since total fixed manufacturing overhead is spread over more units, resulting in a higher net income under absorption costing compared to variable costing. Therefore, net income using the absorption costing method will be greater than net income using the variable costing method.

Assuming More Items Are Sold During a Period Than Are