Respuesta :
Answer:
When the number of units in ending inventory increases through the year, Net income is higher for absorption costing than for variable costing.
Explanation:
Variable costing and absorption costing are methods of applying cost of production to either products or services. Variable costing will only include variable costs directly earned in production. Absorption costing would include both variable costs and fixed costs related to production. Variable costing is also called marginal costing or direct costing and absorption costing is also known as full costing.
The net income under "variable costing systems" becomes higher when the inventory decreases. And when inventory increases, net income for "absorption costing" becomes higher.
The correct statement is that in case of closing inventories balance increasing through the year, the net income is higher for absorption costing than for variable costing. So, the correct option is C.
The net income will be higher as the balance of finished goods has increased, which ultimately leads to reduction in the sales growth of the total finished inventories.
Net Income
- The abortion cost is referred to as such cost which includes the costs like variable costs as well as the overhead costs which are fixed in nature.
- Variable cost is referred to as such cost whose benefits do not stay in the business for more than one year and are recurring in nature.
- So, with an increase in the closing stock balance, the net income for the absorption costing shows more than that of the variable costing.
Hence, the correct option is C that the net income for absorption costing is higher than variable costs when the closing inventories increases throughout the year.
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