Differences Between Variable and Absorption Costing

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Could please assist me answering the questions below.

What are the differences between variable and absorption costing? Why is variable costing not allowed for GAAP reporting? Which method is more useful for internal decision-making? Why? As a manager, which would you prefer? Why?

The word count needs to be 200 or 300.

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Below are my answers.

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Anna Liza Gaspar

ANSWERS

First, absorption costing which is also called full costing requires that the full or total costs of producing a good or service be absorbed by that good or service (Anthony, Hawkins & Merchant, 2003, p. 629). Variable costing, as the name implies, ...

Solution Summary

This solution of 230 words differentiates between variable and absorption costing as well as explains the applicability of both in GAAP and internal decision-making. Reference used is included.

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