ECONOMICS

Detailed explanation-1: -If production exceeds sales, the profit under absorption costing is higher as compared to variable costing. This is due to the deferral of fixed manufacturing overhead costs to the next period in ending inventory, leading to reduced cost of goods sold for the current period and hence a higher profit.

Detailed explanation-2: -When units produced are greater than units sold, i.e., units in inventory increase, absorption income is greater than variable costing income because absorption costing defers a portion of fixed manufacturing costs in finished goods inventory.

Detailed explanation-3: -(2) When units produced is greater than units sold, absorption costing yields the highest profit.

Detailed explanation-4: -The correct statement about absorption and variable costing methods is option C. If the units produced are above the units sold, the company will have ending inventory units at the end.

Detailed explanation-5: -Absorption costing results in a higher net income compared with variable costing.