Asked by Delynn Smitherman on May 18, 2024
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Variable costing net operating income is usually closer to the net cash flow of a period than is absorption costing net operating income.
Variable Costing
A method of costing that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and treats fixed manufacturing overhead as a period expense.
Absorption Costing
A method of accounting that encompasses all costs involved in manufacturing, including direct materials, direct labor, and both variable and fixed manufacturing overhead, as part of a product's cost.
Net Operating Income
The profit a company makes from its core business operations, excluding deductions of interest and taxes.
- Acknowledge the influence of costing techniques on net operating income and inventory oversight.
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Learning Objectives
- Acknowledge the influence of costing techniques on net operating income and inventory oversight.
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