Differences between variable-costing and absorption-costing operating income can be explained by the change in units in beginning and ending inventory of finished goods.

Question

Quizplus · Accepted Answer

The main difference between variable-costing and absorption-costing operating income is the treatment of fixed manufacturing overhead costs. Absorption costing includes fixed manufacturing overhead costs in the cost of goods sold and ending inventory, while variable costing only includes variable production costs in the cost of goods sold. As a result, the change in units in beginning and ending inventory of finished goods can affect the amount of fixed manufacturing overhead costs that are included in cost of goods sold and ending inventory, ultimately impacting the difference between variable-costing and absorption-costing operating income.

Differences Between Variable-Costing and Absorption-Costing Operating Income Can Be Explained