What is 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 both variable and fixed manufacturing costs in the cost of a product, whereas variable costing includes only the variable manufacturing costs. When more units are produced than sold, the fixed manufacturing costs allocated to the unsold inventory under absorption costing are not yet expensed, leading to a higher net income compared to variable costing, where all fixed manufacturing costs are expensed in the period they are incurred.

What Is the Relationship Between Absorption Costing Net Income and Variable