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Absorption cost and variable cost are both a method used to evaluate a company's inventory and products, and the difference between them is that absorption cost includes all direct costs associated with the product, such as direct labor, direct materials, in the accounting , and includes fixed overhead. On the other hand, variable costs may not count some direct costs, and variable costs have fixed overheads. And according to the textbook, Public companies are required to use the absorption costing method in cost accounting management for their COGS (Wild & Shaw, 2021). But variable costs cannot be used for external financial reporting, it doesn't follow the GAAP matching principle . (Investopedia, 2022). So I think variable costing can maximise manipulation of net income, and it can be influenced by ethical issues that alter net income.