When the number of units produced is equal to the number of units sold,net income reported under variable costing is identical to net income reported under absorption costing.

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, with fixed overhead expenses charged to the period they arise.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.

Net Income

The amount of revenue left over after all expenses and taxes have been deducted.