Generally speaking, net operating income under variable and absorption costing will:

A) always be equal.

B) never be equal.

C) be equal only when production and sales are equal.

D) be equal only when production exceeds sales.

The correct answer is C.

Explanation:

The difference between the variable costing method and the absorption costing method, os that the last one includes the fixed manufacturing overhead in the product costs. This means that the units that remain in inventory at the end of the period will include fixed overhead. The cost of goods sold is lower in absorption costing only if not all the units produced are sold.

If all the units produced are sold, both methods provide the same operating income.

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