If units produced are greater than units sold:
A) Variable costing will have a higher profit than absorption costing
B) Throughput costing will have a higher profit than absorption costing
C) Absorption costing will have a higher profit than throughput costing but a lower profit than variable costing
D) Absorption costing will have a higher profit than both throughput costing and variable costing

Question

Quizplus · Accepted Answer

When units produced are greater than units sold, absorption costing will show a higher profit than both throughput costing and variable costing. This is because under absorption costing, some of the fixed manufacturing overhead costs are included in the cost of the unsold inventory and are not expensed in the period they are incurred, thus increasing the profit reported for that period.

If Units Produced Are Greater Than Units Sold