• 1 Marks

MI – May 2022 – L1 – SA – Q3 – Costing Methods

Condition under which variable and absorption costing produce the same profit.

Variable costing and absorption costing statements produce the same profit under which of the following conditions?

A. Production equals sales
B. Production exceeds sales
C. Sales exceed production
D. Sales equal fixed overhead
E. Production equals fixed overhead

Answer: A. Production equals sales

Explanation:
The profit figures for both costing methods align when production equals sales since there is no difference between fixed overheads carried in inventory and those expensed during the period.

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