We learn how variable costing and absorption costing net operating incomes can be reconciled by determining how much fixed manufacturing overhead was deferred in, or released from, inventory during the period. When the units produced exceed the units sold, the net operating income is higher under absorption costing than under variable costing. In contrast, when the units produced are less than the units sold, the net operating income is lower under absorption costing than under variable costing. When the units produced and units sold are equal, absorption costing and variable costing net operating incomes are the same. For each of the statements below, use the dropdown box to select the response that completes the sentence correctly. Knowledge Check 01 When the units produced are equal to the units sold, the net operating income computed using the variable costing method is _________blank the net operating income using the absorption costing method. multiple choice 1 is equal to is less than is greater than Knowledge Check 02 When the units produced exceed the units sold, the net operating income computed using the variable costing method is _________blank the net operating income using the absorption costing method. multiple choice 2 is equal to