Q8.66: A company that uses the variable approach to inventory costing has a break-even point of 12,500 units. Last month they sold just 11,987 units; however, they still reported a net income on their financial statements. How could this happen? A By increasing production levels, more fixed manufacturing costs would be deferred to future periods causing net income to be temporarily inflated. B This could not happen under variable costing. An error must have been made when preparing the income statement. Actual costs of manufacturing must have declined significantly during the last accounting period. D XYZ must have been selling inventory produced several months ago when the costs were much lower