Question: “Absorption-costing income exceeds variable-costing income when the number of units sold exceeds the number of units produced.” Do you agree? Explain.

Question: “Absorption-costing income exceeds variable-costing income when the number of units sold

exceeds the number of units produced.” Do you agree? Explain.
Answer:
No, not agree with the statement.
When the number of units sold exceeds the number of units produced then income under absorption
costing is lower than variable costing approach.
Concept
These are the technique of product costing; absorption costing & variable costing (also known as
marginal costing). In absorption cost, all direct, indirect & fixed factory overheads are charged to
product costs based on normal production using absorption rate. There may be possible that actual
overhead may differ from applied overhead then...