Question

Which of the following situations would cause variable-costing income to be lower than absorption-costing income? Selling expenses increased by 10% during the accounting period. Units sold equaled 39,000 and units produced equaled 42,000. Sales prices decreased by $7 per unit during the accounting period. Units sold equaled 55,000 and units produced equaled 49,000. Units sold and units produced were both 42,000.

Answer 1

Answer:

Units sold equaled 39,000 and units produced equaled 42,000.

Explanation:

The reason is that operating income will be lower under variable costing than  absorption costing when there is a rise in the the unit level of inventory during an  accounting period.

From the question, the 42,000 units of production is 3,000 units greater than the 39,000 units sold. This implies that there is an increase in the unit of inventory level. This usually cause the variable-costing income to be lower than absorption-costing income.

Answer 2

Answer:

Units sold equaled 55,000 and units produced equaled 49,000

Explanation:

Variable-costing income and Absorption-costing income differ due to the amount of fixed overheads that are differed in inventory.

Note : Absorption costing include fixed costs in product costing

Differences in Variable-costing income and Absorption-costing income are only visible is Production does not equal Sales.

If Production equals Sales there would be no any differences