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Differences in operating income between variable costing and absorption costing are due solely to accounting for...

Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.

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Answer #1

In variable Costing method Closing stock is valued without the Fixed cost taken and in the absorption costing closing stock is valued including the fixed cost.

In Variable Costing : All fixed Cost are reduced from the Operating income

In Absorption Costing : Fixed Cost recovery is done on the basis of production so if there is closing stock in then that will included a portion of fixed cost in that which are not in variable Costing  

So the given statement is saying correct.,

There is always differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs.

Answer = Yes i am agreed.

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