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 deducts all manufacturing costs from net operating income; variable costing deducts only prime costs.

Absorption costing includes variable manufacturing costs in product costs; variable costing considers variable 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.