Net operating income is affected by changes in production under both the variable costing and absorption costing approaches.

Question

Quizplus · Accepted Answer

Net operating income under variable costing is affected by changes in production levels because only variable costs are included in product costs. Under absorption costing, both fixed and variable manufacturing costs are included in product costs, so changes in production levels affect inventory values but not immediately the net operating income.

Net Operating Income Is Affected by Changes in Production Under