Asked by Emily Banner on May 16, 2024
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A variable costing income statement focuses attention on the relationship between costs and sales that is not evident from the absorption costing format.
Variable Costing Income Statement
An income statement format that only includes variable costs as cost of goods sold and uses contribution margin to analyze profitability.
Absorption Costing Format
An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.
- Discern the principal differences between absorption costing and variable costing principles.
- Apprehend the idea of contribution margin and its employment in gauging company performance.
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Learning Objectives
- Discern the principal differences between absorption costing and variable costing principles.
- Apprehend the idea of contribution margin and its employment in gauging company performance.
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