When comparing absorption costing with variable costing, the difference in operating
income can be explained by the difference between the

Answer (B) is correct.
Absorption and variable costing differ in their treatment of fixed
overhead: It is capitalized as inventory under absorption costing and not
under variable costing. Thus, the difference in operating income between
the two can be calculated as the difference between the ending inventory
in units and the beginning inventory in units, multiplied by the budgeted
fixed manufacturing cost per unit.