Question 1 What is the cause of the difference between absorption costing net income and variable costing net income? absorption costing includes variable manufacturing costs in product costs; variable costing considers variable manufacturing costs to be period costs absorption costing deducts all manufacturing costs incurred from sales revenue; variable costing deducts only the prime costs from sales revenue absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories: variable costing considers all fixed manufacturing costs to be period costs absorption costing includes fixed administrative costs in product costs: variable costing considers fixed administrative costs to be period costs