ECONOMICS

Detailed explanation-1: -When a company sells the same quantity of products produced during the period, the resulting net income will be identical whether absorption costing or variable costing is used.

Detailed explanation-2: -Marginal Costing only considers variable costs to calculate net income. Which scenario results in the Net Income under Absorption Costing to be equal to the Net Income under Marginal Costing? Unit produced is larger than unit sold.

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: -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-5: -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.