The difference between the Absorption-costing and the Variable (Flexible) costing The Variable-costing and absorption-costing incomes differ only when the level of inventory changes. The variable-costing and absorption-costing approach differ when the production level from that used in setting the fixed-overhead rate that is used in applying fixed overhead to production varies. The absorption-costing excludes fixed manufacturing overhead from the costs of products whereas variable-costing includes fixed manufacturing overhead in the costs of products The variable-costing excludes fixed manufacturing overhead from the costs of products whereas absorption-costing includes fixed manufacturing overhead in the costs of products