Describe the benefits of variable costing methods used for internal reporting purposes.

Please make your initial post by midweek, and respond to at least one other student's post by the end of the week.

Student's post to respond to:

Hello,

One benefits of variable costing methods is that managers gain a better understanding for fluctuating costs of production. As sales fluctuate from month to month, so too do many of the costs associated with production. In addition to this, managers are able to better analyze the production costs.

From here managers can make changes as necessary to reduce variances between actual costs and budgeted costs. With this information, managers can also predict future costs of production which helps for planning. This helps to lead to higher profits in the future.

Variable costing also helps to show profits after all expenses (bills) have been paid. While profit may not be seen because products are still in inventory, once these items are sold, there will be a surplus income.

Johnston, K., Chron, Advantages and Disadvantages of Using Absorption vs. Variable Costing, 2017, http://smallbusiness.chron.com/advantages-disadvantages-using-absorption-vs-variable-costing-34282.html