Question

10. If units produced = units sold, is the net income under variable costing or absorption costing greater?

Answer 1

Answer :

Variable costing and absorption costing usually produce different net operating income figures. The reason is that the fixed manufacturing overhead cost is not treated the same way under two costing methods.

The net operating income under absorption costing systems is always higher than variable costing system when inventory increases and the net operating income under variable costing systems is always higher than absorption costing system when inventory decreases.

So, If units produced is equal to units sold, the net income under variable costing or absorption costing is also same.