When units produced exceed the units sold,income under absorption costing is higher than income under variable costing.

Question

Quizplus · Accepted Answer

In absorption costing, fixed manufacturing costs are included in the cost of goods sold, therefore when units produced exceed the units sold, the fixed manufacturing costs are spread over a larger number of units, resulting in a higher income compared to variable costing where only variable costs are included in the cost of goods sold.

When Units Produced Exceed the Units Sold,income Under Absorption Costing