Which of the following statements is true?
A) Under absorption costing some fixed manufacturing costs are deferred in ending inventory if production is lower than sales.
B) When production and sales are equal, net income will be greater under variable costing than it will be under absorption costing.
C) Under absorption costing only the fixed manufacturing costs associated with inventory produced are expensed.
D) Under variable costing fixed manufacturing costs are expensed in the period in which they are incurred regardless of when the inventory is sold.

Question

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing costs are expensed in the period in which they are incurred regardless of when the inventory is sold. This is because variable costing only includes variable manufacturing costs in the cost of goods sold. Under absorption costing (choice A and C), some fixed manufacturing costs may be deferred in ending inventory if production is lower than sales. Additionally, when production and sales are equal, net income will be the same under both variable and absorption costing (choice B is false).

Which of the Following Statements Is True