What factor related to manufacturing costs causes the difference in operating income computed using absorption costing and operating income computed using variable costing?
A) Absorption costing expenses all costs, whether fixed or variable.
B) Absorption costing "inventories" include all direct manufacturing costs.
C) Absorption costing "inventories" include all fixed manufacturing and period costs.
D) Absorption costing "inventories" include all fixed manufacturing costs.

Question

Quizplus · Accepted Answer

The difference in operating income between absorption costing and variable costing arises because absorption costing includes all fixed manufacturing costs in the cost of inventory. This means that these costs are not expensed in the period they are incurred but are instead expensed as the inventory is sold. Variable costing, on the other hand, expenses all fixed manufacturing costs in the period they are incurred, regardless of when the inventory is sold.

What Factor Related to Manufacturing Costs Causes the Difference in Operating