An ending inventory valuation on an absorption costing balance sheet would
A)sometimes be less than the ending inventory valuation under variable costing.
B)always be less than the ending inventory valuation under variable costing.
C)always be the same as the ending inventory valuation under variable costing.
D)always be greater than or equal to the ending inventory valuation under variable costing.

Question

Quizplus · Accepted Answer

Under absorption costing, both fixed and variable manufacturing costs are included in inventory valuation, whereas under variable costing, only variable manufacturing costs are included. Therefore, the ending inventory valuation under absorption costing will always be greater than or equal to the ending inventory valuation under variable costing, as it includes additional fixed manufacturing costs.

An Ending Inventory Valuation on an Absorption Costing Balance Sheet