The difference in variable costing operating income and absorption costing operating income equals ________.
A) the change in Work-In-Process Inventories times the budgeted fixed overhead rate
B) the change in Finished Goods Inventories times the budgeted fixed overhead rate
C) the change in Raw Materials Inventories times the budgeted variable overhead rate
D) the change in Work-In-Process Inventories times the budgeted variable overhead rate

Question

Quizplus · Accepted Answer

The difference in variable costing operating income and absorption costing operating income is caused by the difference in fixed overhead absorption between the two methods. This difference is determined by the change in Finished Goods Inventories times the budgeted fixed overhead rate. Therefore, option B is the correct answer. Options A, C, and D are incorrect because they do not represent the correct formula for calculating the difference in operating income between the two methods.

The Difference in Variable Costing Operating Income and Absorption Costing