If this year’s production volume is less than sales volume,Select one:a. Contribution margin would equal to gross profit.b. Absorption operating income would equal to variable operating income.c. Variable operating income would be greater than absorption operating income.d. Variable operating income would be less than absorption operating income.

The correct answer is:

d. Variable operating income would be less than absorption operating income.

Here's why:

When production volume is less than sales volume, it means that the company is selling more than it is producing. This implies that the company is selling some of its inventory from previous periods.

In absorption costing, all production costs (both variable and fixed) are included in product cost. This means that when inventory is sold, the cost of goods sold includes both variable and fixed production costs. Therefore, when more units are sold than produced, more fixed costs are released from inventory, reducing the cost of goods sold and increasing the operating income.

In variable costing, only variable production costs are included in product cost. Fixed production costs are treated as period costs and are expensed in the period they are incurred. Therefore, the operating income under variable costing does not change with changes in inventory levels.

So, when more units are sold than produced, the absorption operating income would be greater than the variable operating income.