Even though absorption accounting, as suggested in accounting textbooks, must be employed in preparing income tax reports, financial statements as well as in defending pricing models, a number of times, variable costing has served the same purpose up to and including defending the price practices.
It is claimed in some quarters of the corporate world that, some companies are shifting to variable costing to achieve some form of consistency between the way decisions are made since it relies on variable costing and the way these decisions are reported by financial accounting systems.
This paper will therefore try to compare and contrast absorption costing and variable costing, giving details of the advantages of the latter and weaknesses of the former. It will also endeavor to explore the reasons why absorption costing is preferred despite its weaknesses (Schiff, 1987, p. 36-39).
Absorption costing vs. Variable costing Definitions
Absorption costing, also known as the traditional costing is a commonly accepted accounting principles for external reporting. It entails all the tools of manufacturing, variable and fixed overheads as well as direct materials and labor. It refers also to full costing. Variable costing on the other hand, entails only the variable tools of manufacturing , that is, variable as well as direct labor and materials (Schiff, 1987, p. 36-39).
Both absorption costing and variable costing can be used preparing financial statements, income tax reports as well as in defending pricing practices. Variable costing has been used for the past 70 years as an alternate to absorption costing even though their differences widens when it comes to analysis.
While absorption costing includes all manufacturing tools, variable costing excludes fixed manufacturing overheads. In this regard, absorption costing does not differentiate between variable costs and fixed costs thus cannot be used in (CVP) Cost Volume Profit analysis; on the other hand, variable costing which does differentiate between variable costs and fixed costs is much suited for (CVP) Cost Volume Profit analysis.
Get your 100% original paper on any topic done in as little as 3 hours Learn More Moreover, variable costing is undesirable for peripheral reporting as never complies with the prerequisites while absorption costing does. Variable costing does not consider fixed costs in analysis, absorption costing does (Schiff, 1987, p. 36-39).
Advantages of Variable costing Variable costing has several advantages, for instance; it reveals the relationship the exits between volume, price and cost. When applying variable costing, changes in the inventory does not affect profit, also, it is employed in CVP analysis, pertinent in decision making, identifies fixed costs and when in use, changes in production volume have no effect on the income (Wink
First Grade: Classroom Analysis Analytical Essay
Nursing Assignment Help The paper presents the summary and analysis of the observations of the classroom and school environment second grade school. The key issues that the given paper addresses are psychosocial development, motivation, behaviorism, constructivism, cognition, intelligence, and diversity in the classroom and school environment.
The class under analysis was composed of 18 students of diverse cultural and socioeconomic backgrounds. Age 6 – 7.
The classroom was big with all necessary equipment for the class activities. It was also decorated with plants, arts, rugs, posters and pictures drawn by students. The layout included five large tables with four seats.
There were also several individual desks for individual assignments. The space provided the opportunity to change the location of tables for various activities. In general, the environment of the classroom was engaging and comfortable for organizing different activities.
In the first grade students are not very independent and not very used to new learning activities. In order to organize and motivate children, teacher used a variety of learning styles taking into consideration group and individual characteristics of every student.
During different lessons, he made use of learning through seeing, using hand-outs, videos, illustrations, etc.; through listening, moving and doing, as well as combinations of these strategies. Assignments that included various physical activities were very effective.
The teacher also successfully used the knowledge about psychological development of children of age 6-7 to incorporate it in lessons. “Perception of differences among other ethnic groups arises between the age of 6 and 8 years. At this time, children begin to group people together to understand what people are alike (Martin
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