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In what circumstances would net operating income for both methods be the same? variable and absorption...

In what circumstances would net operating income for both methods be the same? variable and absorption cost.

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Answer #1

When there is no inventory at the beginning and the end of a period, or no changes in the levels of inventory in a period (i.e. the production quantity is equal to the sales quantity in the period), absorption costing and variable costing provide the same profit figures for the period. The difference in income undder absorption cosing and variable costing differs because of apportinment of fixed overhead to ending inventory. In case of absence of ending and beginning inventory, the fixed overhead shall be fully chaged to income statement.

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