If the production is less than sales, then operating income under variable costing is __________?
Correct answer: B. higher income
- A. negative income value
- B. higher income
- C. lower income
- D. zero dividends
Explanation
When sales exceed production, inventory decreases and absorption costing releases previously deferred fixed manufacturing overhead. Consequently, variable-costing operating income is higher than absorption-costing income.
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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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