If the production is greater than sales, then operating income under variable costing is _________?
Correct answer: B. lower income
- A. negative income value
- B. lower income
- C. higher income
- D. zero dividends
Explanation
When production exceeds sales, absorption costing carries some fixed manufacturing overhead in ending inventory, while variable costing expenses it immediately. Therefore, variable-costing operating income is lower.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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