Question
Variable costs and be controlled to rise and fall with production volumes and/or sales levels. Fixed costs can be changed over time (like terminating a
Variable costs and be controlled to rise and fall with production volumes and/or sales levels. Fixed costs can be changed over time (like terminating a lease for a facility we no longer use), but generally cannot be changed in the short term. Variable costing helps managers focus on the costs that they can do something about in the short term (like finding a new supplier for materials or suspending production on holidays where direct labor costs are higher).
Question: You are a plant manager. Your plant has both fixed and variable costs. Your accountant will only prepare either a variable income statement or an absorption income statement for you (your accountant is kind of crap). Do you want the absorption income statement where your fixed overhead is included in your product cost or the variable income statement where your fixed costs are expensed in the current period? Explain your choice.
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