Question

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for ________. a. all overhead costs b. fixed overhead costs c. selling and administrative expenses d. variable overhead costs

Answer 1

B) fixed overhead costs

Step-by-step explanation:

Variable and fixed costs are considered the same for absorption costing net operating income, no difference is made between each type of cost.

On the other hand, variable costing net operating income does separate variable and fixed costs, that is why this system is more appropriate for cost-volume profit analysis.