Variable net income differs from absorption net income because under absorption costing some fixed costs are retained in inventory rather than being expensed.

Question

Quizplus · Accepted Answer

Under variable costing, all fixed manufacturing costs are expensed in the period they are incurred. Under absorption costing, fixed manufacturing costs are allocated to the products produced and are only expensed as the inventory is sold, meaning some fixed costs can be retained in inventory.

Variable Net Income Differs from Absorption Net Income Because Under