When units manufactured exceed units sold, variable costing income
A) equals absorption costing income
B) is less than absorption costing income
C) is greater than absorption costing income
D) is greater by the number of units produced multiplied by the variable cost ratio

Question

Quizplus · Accepted Answer

If units manufactured exceed units sold, there will be some units left in ending inventory. Under absorption costing, these units will still absorb a portion of fixed manufacturing overhead, resulting in a higher cost per unit and higher reported income. However, under variable costing, fixed manufacturing overhead is treated as a period cost and not included in the cost of goods sold. Therefore, variable costing income will be less than absorption costing income.

When Units Manufactured Exceed Units Sold, Variable Costing Income