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What is Reconciliation related to Variable and Absorption Costing?
Variable and absorption costing related to net income varies time to time. The reconciliation can be evaluated by getting the difference between fixed manufacturing overhead in a given time in absorption costing. A differ in quantity in the inventory system occurs due to various possibilities on product’s sale and number of products generated. Sometimes unit sale exceeds unit produced and vice versa.
Our team says, at the beginning of costing or in the first month both variable costing and absorption costing are same. But, gradually the value gets differ as per the value of fixed manufacturing overhead. The number of increased product in inventory influences net income of absorption costing not variable costing. Thus, it is very necessary for students to know the exact terms used in the related assignment. Before starting an assignment, each concept must be clear to make it perfect.
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