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Describe the absorption costing income statement format. What is the benefit of using this income statement...

Describe the absorption costing income statement format. What is the benefit of using this
income statement format for decision making purposes?

Business   Accounting   
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Answer #1

Format of absorption costing

Net sales. XXX

Less cost of goods sales

Opening inventory. XXX

Direct expense

(material, labor) XXX

Variable overhead XXX

Fixed overhead. XXX

Less closing inventory (XXX).    XXX.

Total Cost of goods sold. XXX

Cost per unit = Cost of goods sold / No of itme sold

Benifits of absorption costing income statement for decision making

Absorption costing consider both type of cost ( Fixed and variable). This cost is more realistic as compare to variable costing. Absorption costing more accurately track profit than variable costing. Absorptio costing is more suitable for preparation of account. Also this method is acceptable under GAAP (journal Accepted Accounting principles) .

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