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What do you understand by Variable and Absorption Costing: A Comparison?
It is well-known fact for the accounts students that both methods as variable costing and absorption costing are followed by almost all popular industries. But, there is a great difference between these two costing processes. The decision-making purpose of internal management uses the information they get related to variable costing. In other hand, internal management along with the external organizations used all requisite information of absorption costing. These external parties are a government agencies, auditors or creditors.
Our team explains the solutions in an excellent way. Cases of variable costing and absorption costing the evaluation is done by getting all correct information. But, what is the actual difference? The Fixed manufacturing overhead cost is very important for absorption costing system by which unit product is derived. If you select a variable costing system, then there is no use of a fixed manufacturing overhead cost for finding out unit product.
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