Question

discuss the benefits of variable costing for internal reporting purposes?

Answer 1

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Answer: Discuss internal the benefits of variable reporting purposes : costing for Variable costing facilitates c-v-p analysis since fixed and Variable costs are separated and a contribution margin is calculated. Also, under variable costing, managers Cant artificially inflate profit by producing more units than they sell and burying fixed manufacturing overhead in inventory * The data required for can be taken directly income Statement- cost volume profit (CVP) analysis from a variable Costing format under variable costing, the profit for a period is not affected by changes in inventories - other things semaining the same such as: selling prices, costs, sales miy, etc. protits go in the same direction as Sales when var costing is in use. Managers often assume that unit product cost are variable costs - This is a problem under absorption costing, since unit product costs are a combination of both fixed costs and variable costs under variable costing unit product cost does not contain fixed costs. & The impact the variable amount of Statement . of fixed costs on prokits is emphasized under costing and contribution approach. The total fixed costs appears explicitly on the income

* The costing : following are the advantages of variable - planning Ę control - Managerial Decision-making - product pricing decisions - cost control - Inventory changes do not affect profit - Avoiding the impact of fixed costs - performance evaluation of managers. - segmental Reporting.