If the number of units sold is more than number of units produced, the income under both variable and absorption costing would be the same.

Question

Quizplus · Accepted Answer

Under variable costing, only variable manufacturing costs are treated as product costs while fixed manufacturing costs are treated as period costs. Therefore, if the number of units sold exceeds the number of units produced, there will be a portion of fixed manufacturing costs that are expensed as period costs and will not be included in the cost of goods sold. This results in a higher net income under absorption costing compared to variable costing.

If the Number of Units Sold Is More Than Number