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What is Costing Methods: Variable vs Absorption about?

Variable costing and absorption costing treat fixed overhead costs differently. Variable costing expenses fixed overhead in the period incurred, while absorption costing includes fixed overhead in the product cost. Absorption costing can lead managers to manipulate reported income by overproducing inventory. Both costing methods provide useful information, but absorption costing is typically used for external reporting to follow generally accepted accounting principles.

Author

Clyde Ramos

Language

EN