Supporters of direct costing contend that it provides management with more useful accounting information. Critics of direct costing believe that its negative features outweigh its contribution.

a. Describe direct costing. How does it differ from the conventional absorption costing?

b. List the arguments for and against the use of direct costing.

c. Indicate how each of the following conditions would affect the amounts of net profit reported under conventional absorption costing and direct costing: 1. Sales and production are in balance at standard volume. 2. Sales exceeds production. 3. Production exceeds sales.