Variable Costing and Segment Reporting: Tools for Management

Variable Costing and Segment Reporting: Tools for Management

In this Unit, we explain how to use the contribution format to create variable costing income statements for manufacturers and segmented income statements. We also contrast variable costing income statements and absorption income statements.

How important is it to trace costs appropriately?Explain.

As you are beginning to think about the importance of tracing costs appropriately, please consider the differences between variable costing and absorption costing.What implications does each of these have on such things as financial reporting of profit and pricing your products for the marketplace?

You may also want to think about the issues involved with traceable costs as discussed in our text or in articles that you may find online.