If production exceeds sales, absorption costing will show higher net operating income than variable

costing. The reason is that inventories will increase and therefore part of the fixed manufacturing
overhead cost of the current period will be deferred in inventory to the next period under absorption
costing. By contrast, all of the fixed manufacturing overhead cost of the current period will be charged
immediately against revenues as a period cost under variable costing

Direct costing would be more accurately called variable or marginal costing because in substance it is
the inventory costing method which applies

The central issue in variable costing is what is the proper timing for release of fixed manufacturing
overhead as expense at the time of incurrence, or at the time the finished units to which the fixed
overhead related are sold.