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You have studied the two costing methods and the cost equation. Please answer one of the...

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Accounting

You have studied the two costing methods and the costequation. Please answer one of the following relatedquestions:

1. Discuss the differences between variable costing andabsorption costing.

2. Why is it important to understand a products costequation?

3. Does a products cost equation change throughout itslifecycle? if so, why?

4. Which method is accepted by GAAP? why do you think thismethod was selected?

Answer & Explanation Solved by verified expert
3.6 Ratings (529 Votes)
1 Difference between absorption costing and variable costing Variable costing direct costing Under this costing method fixed manufacturing overhead costs are expensed off in the period in which they are incurred Absorption CostingFull costing method Fixed manufacturing overhead costs are expensed when the product is sold Variable costing method applies to all direct costs as well as variable manufacturing overhead costs to the end product These costs move with the product through the inventory accounts until the product is sold at which point they are expensed on the income statement as costs of goods sold Fixed manufacturing overhead costs are expensed during the period in which they are incurred You can also call variable costingdirect costing or marginal costing Absorption Costing method applies all direct costs and both    See Answer
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You have studied the two costing methods and the costequation. Please answer one of the following relatedquestions:1. Discuss the differences between variable costing andabsorption costing.2. Why is it important to understand a products costequation?3. Does a products cost equation change throughout itslifecycle? if so, why?4. Which method is accepted by GAAP? why do you think thismethod was selected?

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