Assuming the LIFO inventory flow assumption, if production equals sales for the period, absorption costing and variable costing will produce the same net operating income.

Question

Quizplus · Accepted Answer

When production equals sales, there is no change in inventory levels, so the fixed manufacturing overhead costs are fully expensed in both absorption and variable costing, resulting in the same net operating income.

Assuming the LIFO Inventory Flow Assumption, If Production Equals Sales