The difference in operating income under absorption costing and variable costing is due solely to the timing difference of expensing fixed manufacturing costs.

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing costs are included in the cost of goods sold and are expensed when the units are sold, while under variable costing, fixed manufacturing costs are expensed when they are incurred. This results in a timing difference that affects operating income, but does not impact the actual amount of fixed costs incurred.

The Difference in Operating Income Under Absorption Costing and Variable