Question

For each of the statements below, use the dropdown box to select the response that completes the sentence correctly. Knowledge Check 01 When the units produced are equal to the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method. multiple choice 1 is less than is equal to is greater than Knowledge Check 02 When the units produced exceed the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method. multiple choice 2 is greater than is equal to is less than Knowledge Check 03 When the units produced are less than the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method. multiple choice 3 is greater than is equal to is less than

Answer 1

Answer:

a. is equal to

b. is greater than

c. less than

Explanation:

The difference between variable costing and absorption costing methods is that the overheads are treated differently.  While absorption costing method does not differentiate the fixed manufacturing overheads from the variable manufacturing costs, the variable costing method only accounts for the variable elements of all costs, whether manufacturing cost or not.