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Discuss two costing method treat fixed overhead

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Reference no: EM132612272

Absorption costing and variable costing differ in three aspects:

1. with their treatment of the fixed overhead

Absorption Costing -product cost

Variable Costing - period cost

2. how they present cost in their respective income statement.

Absorption Costing - presents cost according to its function-product and period.

Variable Costing - contribution margin income statement - according to behavior.

3. and how they are being used in business.

Absorption Costing - external reporting

Variable Costing - internal reporting

Question 1: Discuss the relationship among the way the two costing method treat fixed overhead, how they present cost and how they are being used in the business?

Reference no: EM132612272

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