Which of the following situations would cause variable-costing income to be higher than absorption-costing income?
A)Units sold equaled 39,000 and units produced equaled 42,000.
B)Units sold and units produced were both 42,000.
C)Units sold equaled 55,000 and units produced equaled 49,000.
D)Sales prices decreased by $7 per unit during the accounting perioD.
E)Selling expenses increased by 10% during the accounting period.

Question

Quizplus · Accepted Answer

In variable costing, only variable manufacturing costs are considered as product costs and fixed manufacturing costs are considered as period costs. Therefore, if units sold exceed units produced, there will be fewer fixed overhead costs allocated to each unit and this will result in higher variable-costing income compared to absorption-costing income. In choice C, units sold (55,000) exceed units produced (49,000) and this would lead to higher variable-costing income.

Which of the Following Situations Would Cause Variable-Costing Income to Be