Question

Full-absorption costing and variable costing would produce the same net income if a company had no beginning inventory and sold everything it produced during the year.

True

False

Answer 1

answer )  True

Explanation :1) absorption costing is the full costing it takes all the product costs including fixed manufacturing overhead . where as variable costing do not take the fixed manufacturing overhead .

2) both systems will report different profits when there is a difference in inventory levels (when there is a opening and closing stocks )

3)In general the variable costing system will report lower profit than absorption costing when inventory increses and vice versa

4) when inventory increases fixed manufacturing OH is differed in inventory and it will releases fixed mfg OH when inventory decreases

4) both systems will reoort the same net income when no opening and closing stock ( that means company had no beginning inventory and sold everything it produced )