Asked by Natasha De Freitas on May 27, 2024
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Managers can use variable costing information for internal decision making,but they must use absorption costing for external reporting purposes.
Variable Costing
A bookkeeping approach that incorporates solely variable production expenses such as direct materials, direct labor, and variable manufacturing overhead into the costs of products, while omitting fixed overhead.
Internal Decision Making
The process of making choices or decisions within a company based on internal data and analysis.
Absorption Costing
Absorption costing is an accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.
- Acquire knowledge about the variances between variable and absorption costing techniques, and their practical applications.
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Learning Objectives
- Acquire knowledge about the variances between variable and absorption costing techniques, and their practical applications.
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