Chapter 6, Problem 22Q

To determine

Absorption Costing: Absorption costing is a method for calculating the full cost or total cost of a single product in production process. It includes the total cost assigned to products.

Variable Costing: The method of costing which takes only variable cost into consideration for calculating the product costs is called as variable costing. Variable costing method is useful for establishing the lowest cost at which a particular product can be sold.

To Determine: Whether net income reported under variable costing is higher or lower when compared to absorption costing, in the long run.