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How might the Apple Company use the Variable Costing method and Absorption Costing method on Apple's...

How might the Apple Company use the Variable Costing method and Absorption Costing method on Apple's latest devices such as the iPhone XR? What are the positives and negatives of both of these methods?

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Answer #1

Variable costing method

Advantages

  • It categorize fixed and variable
  • Profit is calculated on basis of sale volume rather than production.

Diadvantages

  • It is not useful for decision making
  • Not suitable for external reporting purpose.

Absorption costing method

Advantages

  • Accurate profit is determined under absorption method
  • It consider all types of cost whether variable or fixed.
  • It is in compliance with GAAP

Diasdvantages

  • Does not consider the cost of fixed overhead of goods that are not sold.
  • It does not provide good analysis of cost and volume as variable costing does.
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