In general, if inventory increases during an accounting period,
A)variable costing will report less operating income than absorption costing.
B)absorption costing will report less operating income than variable costing.
C)variable costing and absorption costing will report the same operating income.
D)None of the above are correct.

Question

Quizplus · Accepted Answer

When inventory increases, absorption costing defers some fixed manufacturing costs in inventory, leading to higher operating income compared to variable costing, which expenses all fixed costs in the period incurred.

In General, If Inventory Increases During an Accounting Period