Question: Variable Costing and Segment Reporting. 1. Does the use of absorption costing and variable costing have any impact on a company's reporting of net income?

Variable Costing and Segment Reporting.

1. Does the use of absorption costing and variable costing have any impact on a company's reporting of net income?

1B. Which one better supports decision making? Explain.

2. Since only absorption costing can be used to prepare financial statements (Required by GAAP), what do you think is the reason for this?

2B. Do you agree with this rule?

3. What's so important about fixed manufacturing costs that in order for a company to be considered "truly profitable" it must cover the whole amount of fixed costs?

4. Sometimes an unprofitable segment is not eliminated due to its amount of fixed costs, can you discuss why this is done and whether it makes sense?

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