Two observations can be made about variable and absorption costing. First, a variable costing income statement classifies cost based on behavior, variable or fixed. An absorption costing income statement classifies cost based on nature (use in manufacturing or selling and administration, etc.). Second, in variable costing income statements, fixed manufacturing costs are excluded from inventoriable costs. In absorption costing income statements, fixed manufacturing costs are included in inventoriable costs. Many large companies prepare both kinds of income statements. For what purpose? Why does this make sense to you now that you have completed a semester of Cost Accounting study?