Requirement $2.$ Which statement shows the higher operating$$ income? Why?

Absorption costing operating income is

higher than

variable costing operating income. This is because absorption costing

defers $

$126,000$

of fixed manufacturing overhead as an asset in ending inventory. In contrast, variable costing expenses

all of

the fixed manufacturing overhead during the year.

$$

Part $4$

Variable costing expenses $

$126,000$

less

costs during the year, so variable costing operating income is $

less

than absorption costing income the year.