Effects of Variable Costing vs Absorption Costing

What happens to inventory when production equals sales?

• Inventory decreases

• Inventory increases

• Inventory is sold out

• No change in inventory

When production is greater than sales, how does variable costing income compare to absorption costing income?

• Variable costing income is higher

• Variable costing income is lower

• Absorption costing income is lower

• Both are equal

If production is less than sales, what happens to inventory?

• Inventory is unaffected

• Inventory remains the same

• Inventory increases

• Inventory decreases

In the scenario where production is less than sales, how does variable costing income compare to absorption costing income?

• Variable costing income is lower

• Absorption costing income is higher

• Variable costing income is higher

• Both are equal

How can absorption and variable costing methods be used in financial reporting?

• To decrease sales

• To increase production

• To manipulate reported income

• To standardize income