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Compare and contrast the information that is contained in a variable costing income statement and an...

Compare and contrast the information that is contained in a variable costing income statement and an absorption costing income statement. Do not discuss computations--those are assumed. Discuss the uses and qualities of the two types of information. Be specific.

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Answer #1
Absorption Income Statement Variable Income Statement
1-It is used for External Reporting. 1-It is used for Internal Reprorting.
2-In this Operating Income changes if there is a change in production. 2-In this Operating Income changes if the sales Increases or Decreases.
3-Cost of Inventory will more than Variable Costing because including of Fixed Factory Overhead. 3-Cost of Inventory will be less than Absorption Costing because of not including of Fixed Factory Overhead.
4-This Statement is used in Determing Tax . 4-This Statement is used Cost-Volume-Profit Analysis.
5-It is not preferred in Managerial Decision Making. 5-It is Preferred in Managerial Decision Making.
6-Company cannot calculate Break Even Analysis if Absorption Income Statement is Prepared. 6-Company can Easily Calculate Break Even Analysis from Variable Income Statement.
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