Assuming the LIFO inventory flow assumption, if production is less than sales for the period, absorption costing net operating income will generally be greater than variable costing net operating income.

Question

Quizplus · Accepted Answer

If production is less than sales for the period, there will be less units in ending inventory under LIFO, resulting in a lower cost of goods sold and higher net operating income under variable costing compared to absorption costing. Therefore, variable costing net operating income will generally be greater than absorption costing net operating income.

Assuming the LIFO Inventory Flow Assumption, If Production Is Less