State the conditions under which the income statement prepared with absorption costing and marginal costing will give different results.

The income statement prepared using absorption costing will include all manufacturing costs, including both fixed and variable costs, as product costs. This means that fixed manufacturing overhead costs will be treated as product costs and will be included in the cost of goods sold.

On the other hand, the income statement prepared using marginal costing will only include variable manufacturing costs as product costs. Fixed manufacturing overhead costs will be treated as a period cost and will be expensed in the period in which they are incurred.

As a result, the income statement prepared using absorption costing will generally show a higher cost of goods sold and a lower net income compared to the income statement prepared using marginal costing. This is because the absorption costing method includes more costs as product costs, which increases the cost of goods sold and reduces net income.

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