Absorption costing income statements and variable costing income statements may differ because of their treatment of fixed overhead costs.

Question

Quizplus · Accepted Answer

Absorption costing includes fixed overhead costs in the cost of goods sold, while variable costing treats fixed overhead costs as period expenses and does not include them in the cost of goods sold. Therefore, the treatment of fixed overhead costs can result in differences between the two types of income statements.

Absorption Costing Income Statements and Variable Costing Income Statements May