When reconciling from variable costing income to absorption costing income, if production exceeded sales, then the:
A)Fixed overhead in the beginning inventory is added
B)Fixed overhead in the beginning inventory is deducted
C)Fixed overhead in the ending inventory is added
D)Fixed overhead in the ending inventory is ignored

Question

Quizplus · Accepted Answer

When production exceeds sales in absorption costing, some fixed overhead costs are not recognized in the period's cost of goods sold but rather are deferred to the following period as part of the ending inventory. Therefore, fixed overhead in the ending inventory is added back when reconciling from variable costing income to absorption costing income.

When Reconciling from Variable Costing Income to Absorption Costing Income