Costing Methods Paper Essay

Variable and submerging costing methods are two disparate costing methods. Almost all successful companies in the world use both methods. Variable costing and assiduity costing cannot be substituted for one some other because both the systems have their own benefits and limitations (Accounting for management). This paper will complete and discuss exercise 19-17 in Wiley Plus it will discuss the following questions In this case, would it be better to use the varying or absorption costing method, and why? In this example Polk Company should use the absorption method, because the absorption only uses bash that allocates to the 80,000 units sold. Whereas the variable method counts the fixed overhead as a period expense, the fixed overhead during this period is calculated on 95,000 units produced, when the absorption method is used. The variable method just calculates fixed overhead on 80,000 units sold.What are the benefits of the two methods?Both systems have their own benefits an d limitations. The absorption method gives management information of intersection cost this is the main benefit of the absorption method. The benefit of the variable method is it gives an output the mimics the cash flow of the company. Which method would lead to the best decision when a competitor is submitting a lower bid for your product? The absorption method would be best although both methods are used, with variable costing expenses remains the same, and with the absorption method fixed production cost are period cost. Variable costing method helps with demand based pricing.ReferencesAccounting for management. (n.d.). Variable costing versus absorption costing. Retrieved from http//www.accountingformanagement.org/variable-vs-absorption-costing/