Which of the following is true when units produced exceed units sold?
A)Full costing and variable costing will yield the same net income.
B)Full costing assigns a portion of the fixed manufacturing costs to the units in ending inventory.
C)Net income will be higher under variable costing than under full costing.
D)Inventory levels will decrease.

Question

Quizplus · Accepted Answer

When units produced exceed units sold, there will be unsold units leftover in ending inventory. Full costing assigns a portion of the fixed manufacturing costs to the units in ending inventory, whereas variable costing only considers variable manufacturing costs as expenses. This means that under full costing, net income will be lower than under variable costing because some fixed manufacturing costs are being deferred to later periods. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect.

Which of the Following Is True When Units Produced Exceed