Question
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)?
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