ECONOMICS

Detailed explanation-1: -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-2: -Since only the current fixed manufacturing overhead costs are expensed under variable costing, the net operating income reported under absorption costing will be less than the net operating income reported under variable costing.

Detailed explanation-3: -Answer and Explanation: In variable costing, all the fixed costs are recorded as period costs and in absorption costing, fixed manufacturing costs are part of the manufacturing costs. If production is equal to sales units, the net income of the two methods are the same.

Detailed explanation-4: -If the number of units produced in a period is smaller than the number of units sold in period, absorption costing income will be higher than variable costing income. always be less than income determined using absorption costing.