Q-21-4RQ - Horngren'S Financial And Managerial Accounting

Question

When units produced equal units sold, how does operating income differ between variable costing and absorption costing?

Step-by-Step Solution

Answer

Answer

 

No difference in operating income under variable costing and absorption costing.           

 

Step 1: When units are produced equal units sold

When units produced equal units sold, it means there is no beginning and ending inventory balance.

Step 2: Difference in operating income

There is no difference in operating income when units produced are equal to units sold because all fixed costs are charged as expenses while calculating operating income under both methods.