Please help analyzing the difference between Variable Costing vs. Absorption Costing!
How each is used and who uses? Give examples of each.
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Variable Costing vs. Absorption Costing
Absorption costing is known as full costing, in which all manufacturing costs are allocated to products without considering whether they are fixed or variable. On the other hand, variable costing or marginal costing includes only variable costs in decision-making and excludes fixed manufacturing overheads as a period cost. Therefore, variable costing includes only variable manufacturing costs because fixed manufacturing costs are treated as period cost that is expensed in the period incurred, while absorption costing involves both variable and fixed manufacturing costs because all costs are involved in the production (Drury, 2008).
A company without any distinction between variable-cost and fixed-cost cannot use variable costing. For example, in internal reporting, some ...
The solution analyzes the difference between variable costing vs. absorption costing.