How will net income under variable costing compare to net income under absorption costing in the following three situations? Explain briefly the cause of any differences.
(a)Units produced equal units sold
(b)Units produced exceed units sold
(c)Units produced are less than units sold

(a)Income is identical under variable costing and absorption costing when the units produced equal the units sold.
(b)When units produced exceed units sold,income under variable costing is less than income under absorption costing.This is because some of fixed overhead was allocated to ending inventory under absorption costing,but all of fixed overhead was expensed under variable costing.
(c)When units produced are less than units sold,income under variable costing is greater than income under absorption costing.This is because absorption costing is expensing some of a prior period's fixed overhead in addition to the current period's fixed overhead,while variable costing is only expensing the current period's fixed overhead.