Respuesta :
When inventories increase during the period, income under variable costing will be "less than" under absorption costing.
What is variable costing?
Some features of variable costing are-
- In managerial & cost accounting, the notion of variable costing refers to the exclusion of fixed manufacturing overhead from the brand of production.
- The approach stands in contrast to absorption costing, which allocates the fixed production costs to the output of products.
- Variable costing is not allowed to be utilized in financial reporting under accounting standards like IFRS and GAAP.
What is under absorption costing?
Some key features of under absorption costing are-
- Anything that comprises a direct cost of creating a good is included in the cost base through absorption costing.
- Fixed overhead costs are also accounted for in the product costs by absorption costing.
- Wages paid to those who actually make the product, all raw materials required to make it, and all overhead expenditures including all utility bills) incurred during production are only a few of the costs involved in product manufacturing.
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