Which of the following statements is correct?
A) Inventories under absorption costing are always higher than under variable costing.
B) Cost of goods sold under absorption costing is always higher than under variable costing.
C) The amount of fixed overhead expensed under absorption costing is always higher than under variable costing.
D) Inventories under absorption costing are always higher than under variable costing AND cost of goods sold under absorption costing is always higher than under variable costing.

Question

Quizplus · Accepted Answer

Inventories under absorption costing are higher than under variable costing because absorption costing includes fixed overhead costs in inventory, while variable costing does not. Cost of goods sold under absorption costing is also higher than under variable costing because absorption costing includes fixed overhead costs in cost of goods sold, while variable costing does not.

Which of the Following Statements Is Correct