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1. How does variable costing help a company make good management decisions? 2. List some examples...

Question:

1. How does variable costing help a company make good management decisions?

2. List some examples of ways in which a business would report items that utilize variable costing models.

Variable Costing:

Variable costing is a method of costing the separates variable cost into fixed cost. Variable cost are Cost that varies depending on their own cost drivers. One example is Direct Materials cost driver is the Unit produced.

Answer and Explanation:

The answer is

1. Variable Costing helps a company in making good management decisions because variable cost are cost that can be controlled based on their own cost drivers. By controlling this cost drivers, management can minimize cost and at the same time maintaining same level of production or even produce more than past production.

2. One Examples is Inventory reporting in a Retail kind of business. In this kind of business, you can choose to report the inventory in First-In, First-Out Method or Last-In, Last-Out Method. Both methods need to keep a record of each amount of purchase and divide it on the amount of unit purchased.

In Manufacturing, Direct Materials or Raw Materials can be measured using the same method in Inventory for Retail. Direct Labor also use Time Cost Sheet. Time Cost Sheet is the record of the time each employee used on the job and they got paid base on the time they spent.


Learn more about this topic:

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Variable Costing: Method, Formula & Advantages

from Financial Accounting: Help and Review

Chapter 13 / Lesson 5
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