The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured
A)exceed units sold
B)equal units sold
C)are less than units sold
D)are equal to or greater than units sold

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is allocated to each unit produced. Therefore, when units manufactured exceed units sold, some of the fixed manufacturing overhead costs are included in the ending inventory and not expensed in the current period. This results in higher income under absorption costing compared to variable costing, where all fixed manufacturing overhead is expensed in the period incurred.

The Amount of Income Under Absorption Costing Will Be More