Question: “Absorption-costing income exceeds variable-costing income when the number of units sold...

Question

Question: “Absorption-costing income exceeds variable-costing income when the number of units sold exceeds the number of units produced.”  Do you agree?  Explain.

Robert · Accepted Answer

Question: “Absorption-costing income exceeds variable-costing income when the number of units sold 
exceeds the number of units produced.”  Do you agree?  Explain. 
Answer: 
No, not agree with the statement.  
When the number of units sold exceeds the number of units produced then income under absorption 
costing is lower than variable costing approach. 
 Concept 
These are the technique of product costing; absorption costing & variable costing (also known as 
marginal costing). In absorption cost, all direct, indirect & fixed factory overheads are charged to 
product costs based on normal production using absorption rate.

Question: “Absorption-costing income exceeds variable-costing income when the number of units sold exceeds the number of units produced.” Do you agree? Explain.

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