Question

Net income computed under absorption costing will be: higher than net income under variable costing when units produced are greater than units sold. higher than net income under variable costing when units produced are less than units sold. higher than net income under variable costing in all cases. equal to net income under variable costing in all cases.

Answer 1

higher than net income computed under variable costing when units produced are greater than units sold

Step-by-step explanation:

Absorption costing and variable costing techniques are used to compute the accounting cost of various operation. The calculation procedures of both the techniques are different; that is why the results are different. The net income under absorption costing is higher because it takes into account the indirect expenses and indirect costs. Likewise, absorption costing technique also includes manufacturing or overhead cost.