Which statement best describes the general relationship between inventory values calculated using the variable costing method and inventory values calculated using the absorption costing method?
A) They will be equal.
B) Inventory values calculated using the variable costing method will be less.
C) Inventory values calculated using the variable costing method will be greater.
D) Inventory values calculated using the variable costing method will be twice as much.

Question

Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are included in inventory values whereas under absorption costing, both variable and fixed manufacturing costs are included. Since fixed costs are not included in inventory values under variable costing, inventory values calculated using the variable costing method will be less than inventory values calculated using the absorption costing method.

Which Statement Best Describes the General Relationship Between Inventory Values