The inventory cost computed under absorption costing is ____ the inventory cost computed using variable costing.
A) equal to
B) half of
C) greater than
D) thrice as much

Question

Quizplus · Accepted Answer

Under absorption costing, both fixed and variable manufacturing costs are included in the inventory cost calculation, whereas variable costing only includes variable manufacturing costs. Since fixed costs are generally higher than variable costs, inventory costs under absorption costing are higher than under variable costing. Therefore, the correct answer is C (greater than).

The Inventory Cost Computed Under Absorption Costing Is ____ the Inventory