Which statement best reflects the relationship between absorption costing net income and variable costing net income?
A) Absorption costing net income exceeds variable costing net income when units produced and sold are equal.
B) Variable costing net income exceeds absorption costing net income when units produced exceed units sold.
C) Absorption costing net income exceeds variable costing net income when units produced are less than units sold.
D) Absorption costing net income exceeds variable costing net income when units produced are greater than units sold.

Question

Quizplus · Accepted Answer

Absorption costing includes fixed manufacturing overhead in inventory costs, so when production exceeds sales, some fixed costs are deferred in inventory, leading to higher net income compared to variable costing.

Which Statement Best Reflects the Relationship Between Absorption Costing Net