When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs released from inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income.

Question

Quizplus · Accepted Answer

This is correct as fixed manufacturing overhead costs are included in inventory under absorption costing and are only released when the inventory is sold. Therefore, deducting these costs from variable costing net operating income will give the absorption costing net operating income.

When Reconciling Variable Costing and Absorption Costing Net Operating Income