Supporters of direct costing have contended that it provides management with more useful acVS. ABSORPTION counting information. Critics of direct costing believe that its negative features outweigh its conCOSTING tributions. mu5 Required:

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

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

¢ 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 exceed production.

3 Production exceeds sales.