Changes in inventory levels do not affect income amounts between variable and absorption costing because the difference in accounting for fixed manufacturing overhead offsets the affect.

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Changes in inventory levels can affect income amounts between variable and absorption costing. Under variable costing, fixed manufacturing overhead is treated as a period expense and is not included in the cost of goods sold. As a result, changes in inventory levels only affect variable costs and do not impact income amounts. However, under absorption costing, fixed manufacturing overhead is included in the cost of goods sold and changes in inventory levels can impact income amounts because the fixed overhead costs are allocated to units produced and held in inventory.

Changes in Inventory Levels Do Not Affect Income Amounts Between