All things equal, which would be superior: variable orabsorption costing?
If you were take away the pros and cons of both the variablecosting and absorption costing and look at them for their facevalue, which system would be the better of the two? Realistically Iknow that that is not possible and I do understand that absorptioncosting and variable costing each have their own purposes and uses;however, from the standpoint of a company I am trying to understandthe practicality of absorption versus variable costing (if both areconsidered to be equal).
What I mean by that exactly is, I see (and favor) variablecosting as a way of being able to more quickly assist management inmaking their decisions in regard to a specific product'sprofitability. The expenses are broken out into line items and (tome) it's much more clear on the various expenses going into acertain product. For example, if there were to be a materialchange, which also decreased the amount of direct labor and asresult the per unit price were to decrease, those changes are ableto be easily identified rather than just being all lumped togetherin one line item.
With absorption costing, I see it more as summary and I thinkthat the long-term decisions could be hindered or madeincorrectly.
