<![CDATA[Variable costing and absorption costing differ in how they treat fixed costs. These differences can change the cost of goods manufactured the profit shown on the books the value of inventory and the decisions that managers make. This study set out to look at those differences and to see how useful each method is for managers. The researchers used a literature review and a descriptive qualitative method to gather and combine the best academic papers. They examined three areas: how costs are treated how profit and inventory are affected and how the cost data is used in decision making. The results show that absorption costing puts all production costs, including fixed overhead into the product cost. Variable costing on the hand treats fixed overhead as a period cost. Because of this the cost of goods. The profit numbers can change, especially when the amount made does not match the amount sold. For short-term decisions variable costing gives managers the data needed for cost-volume-profit and contribution-margin analysis. Absorption costing gives a picture of production costs, which is useful, for setting product prices and valuing inventory. In the end the study says that the two costing methods each provide useful information and that managers can use them together depending on what they need to achieve.]]>
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