Powell Corporation Produced 80,000 Units and Sold 78,000 Units in Its

Multiple Choice

Powell Corporation produced 80,000 units and sold 78,000 units in its first year of operations. If the company had produced 1,000 fewer units, what would have been the effect on operating income under variable and absorption costing?

A) There would be no effect on operating income under variable costing, but operating income under absorption costing would increase.
B) There would be no effect on operating income under variable costing, but operating income under absorption costing would decrease.
C) Operating income under variable costing would decrease, but operating income under absorption costing would increase.
D) Operating income under both variable costing and absorption costing would decrease.