Question: Why are inventory valuations smaller with variable costing than with absorption costing? Baddour, Inc., manufactures a product whose unit variable and fixed production costs are

Why are inventory valuations smaller with variable costing than with absorption costing?

Baddour, Inc., manufactures a product whose unit variable and fixed production costs are $5 and $3, respectively. There was no beginning inventory of this product, but 80 units remained unsold at the end of the year.

Required:

Assume the variable (direct) costing method is used instead of the absorption costing method. What would be the change in the dollar amount of ending inventory?

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