If production exceeds sales for the period, variable costing net operating income will typically be greater than absorption costing net operating income

Question

Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are included in product costs, and fixed manufacturing overhead is expensed in the period incurred. If production exceeds sales, under absorption costing, some of the fixed manufacturing overhead costs are included in the ending inventory and not expensed immediately, leading to a higher net operating income compared to variable costing where all fixed costs are expensed in the period they are incurred.

If Production Exceeds Sales for the Period, Variable Costing Net