Effects of Variable Costing vs Absorption Costing

The video tutorial explains the impact of production and sales on inventory and income using variable and absorption costing methods. When production equals sales, inventory remains unchanged, and income is the same for both costing methods. If production exceeds sales, inventory increases, and income is lower under variable costing compared to absorption costing. Conversely, if production is less than sales, inventory decreases, and income is higher under variable costing. The tutorial highlights how these costing methods can influence reported income based on production and sales levels.

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