When the units sold is greater than the units produced,
A)ending inventory using absorption costing will be greater than ending inventory under variable costing.
B)ending inventory using absorption costing will be less than ending inventory under variable costing.
C)ending inventory using absorption costing equal ending inventory under variable costing.
D)ending inventory using absorption costing could be greater than, less than or equal to ending inventory under variable costing.

Question

Quizplus · Accepted Answer

Ending inventory using absorption costing includes fixed manufacturing costs, while ending inventory using variable costing does not. When units sold are greater than units produced, the ending inventory will be lower under absorption costing than under variable costing, because more fixed costs will be allocated to the units sold under absorption costing.

When the Units Sold Is Greater Than the Units Produced