Which inventory costing method calculates operating income?

Question

Quizplus · Accepted Answer

Both absorption and variable costing calculate operating income, but they do so in different ways. Absorption costing considers all of a company's manufacturing costs, including fixed overhead expenses, in the cost of goods sold calculation, which can lead to fluctuations in operating income based on changes in production levels. Variable costing only considers the variable costs directly attributed to producing each unit of product, which can provide a more stable operating income calculation even with fluctuations in production levels. Therefore, both methods can be used to calculate operating income, but they will provide different results.

Which Inventory Costing Method Calculates Operating Income