When a company produces more units than it sells, absorption costing income will exceed variable costing income.

Question

Quizplus · Accepted Answer

When a company produces more units than it sells, some of the fixed manufacturing overhead costs are absorbed into inventory under absorption costing. This results in a higher cost of goods sold and lower net income under variable costing compared to absorption costing. Therefore, absorption costing income will exceed variable costing income in this scenario.

When a Company Produces More Units Than It Sells, Absorption