A decrease in inventory levels will cause which of the following when comparing net profit under absorption and variable costing?

Question

Quizplus · Accepted Answer

When inventory levels decrease, fixed manufacturing overhead costs that were previously deferred in inventory under absorption costing are released to the cost of goods sold, reducing net profit. Under variable costing, these costs are expensed in the period incurred, leading to a higher net profit compared to absorption costing.

A Decrease in Inventory Levels Will Cause Which of the Following