Q 8.66: Arthur is trying to explain to his partner why their company recorded a loss in June when 60,000 units were sold, but showed a profit in July when sales were also 60,000 units. Both partners know there were no changes in costs between the two months. What would Arthur say? A Under variable costing, producing significantly more units than are being sold provides the opportunity to defer fixed manufacturing overhead costs to future periods, which could have the effect of turning a profit into a loss. B The only way this could happen is if someone inadvertently recorded fixed manufacturing overhead as a product cost in one month and a period cost in the next month. There must have been an error in calculating the net income (loss), because all other things being equal, equal sales should result in equal net incomes. D Under absorption costing, producing significantly more units than are being sold provides the opportunity to defer fixed manufacturing overhead costs to future periods, which could have the effect of turning a loss into a profit