When the number of units sold exceed the number of units produced, income report

Question

When the number of units sold exceed the number of units produced, income reported under absorption costing will be lower under absorption than under variable costing. Which of the following gives the best justification of the above statement?

Income under absorption costing is always less than income reported using variable costing, regardless of the number of units produced.

Income under absorption costing is always more than income reported using variable costing, regardless of the number of units produced.

The fixed overhead cost deferred in ending inventory is greater than the fixed overhead cost recognized from beginning inventory.

The fixed overhead cost deferred in ending inventory is less than the fixed overhead cost recognized from beginning inventory.

Income under absorption costing is always less than income reported using variable costing, regardless of the number of units produced.

Income under absorption costing is always more than income reported using variable costing, regardless of the number of units produced.

The fixed overhead cost deferred in ending inventory is greater than the fixed overhead cost recognized from beginning inventory.

The fixed overhead cost deferred in ending inventory is less than the fixed overhead cost recognized from beginning inventory.

Explanation / Answer

The fixed overhead cost deferred in ending inventory is less than the fixed overhead cost recognized from beginning inventory.

The fixed overhead cost deferred in ending inventory is less than the fixed overhead cost recognized from beginning inventory.

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