Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

at the end of the chapter, there was a scenario that discussed the difference between using Absorption Costing and Variable Costing to track our costs.

at the end of the chapter, there was a scenario that discussed the difference between using Absorption Costing and Variable Costing to track our costs. It prompted us to think about how there is incentive behind using the Absorption Costing method if a supervisor was presented with the condition that if operating income is greater, they would receive a bonus. Because you dont include whats in ending FG into COGS when determining operating income under Absorption, you would get a higher operating income value than if you utilized the Variable Costing method, which accounts for everything within the period. Do you have any thoughts about why an Absorption Costing method would be preferred over using the Variable Costing method (not necessarily specific to this scenario, but just in general)?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions