Advantages and Limitations of Variable Costing Homework Help
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Based on the production quantity of the firm, they are divided into three classifications. Job production, batch production and mass production are the three indefinite variations which actually provide income to the company based on their production. Obviously there would be lot of costing involved in these productions. By variable costing we mean, the amount of production that varies or changes with respect to the ordered quantity. For example if the quantity is less the variable cost would be less and vice versa. It can also be termed as the corporate expense that can be varied with the required production input demand. Many students from commerce field are supposed to have a definite knowledge in this area. We deliver Advantages and Limitations of Variable Costing homework Help to such students and make them achieve so.
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Advantages of Variable Costing
External parties of the firm are satisfied by preparing financial statements and hence companies need absorption costing for that. While variable costing is required for a better cost management, it is severely approached. Our Advantages and Limitations of Variable Costing homework Help team experts have compiled a few advantages and pros of variable costing.
1. Planning and control: short term planning can be manipulated by using variable costing. Future predictions, future sales and future productions level in order to know the level of expenditures at various production levels can be determined.
2. Managerial decision making: to take many financial decisions the knowledge of the financial condition of the firm is to be known to the owners and managements. For accumulation of analysis of cost all the fixed and variable costing are keenly analyzed along with the semi variable expenses.
3. Product pricing decisions: although absorption costing can be determined but variable costing concentrates more on determining information for pricing decisions. When maximum excess of total sales revenue over total sales cost is achieved, it is considered as the optimum price.
4. Cost control: for this, cost is needed to be segregated in separate variables and fixed totals. Separation of variables will enforce the use of standards and budgets which ultimately helps the decision making committee in controlling costs. Variable manufacturing cost is related to variable costing that is supposed to change with the production volume of the order. These costs can be controlled at cost centre levels.
5. Inventory changes do not affect profit: sales volume determines profit, but when absorption costing is considered, both sales and production will enhance the nature of profit. But in variable costing, profit is not dependent over changes in inventory features.
In our Advantages and Limitations of Variable Costing homework Help we deliver many other advantages and explain them with case studies and real time examples.
Limitations of Variable Costing
Every coin has two sides and here also as our Advantages and Limitations of Variable Costing homework Help team suggest there are a few limitations that restricts variable costing to become the prior metaphor for preparing financial statements.
1. Financial statements prepared by taking the consideration of variable costing are against the GAAP standards. So there is a possibility of auditors rejecting it. Our Advantages and Limitations of Variable Costing homework Help team experts have worked in the field and know it inside out.
2. Absorption costing is much more influenced among the tax laws of various countries and hence strikes variable costing out.
3. Units of products require fixed costs and variable costing does not provide that to them. There is mismatch of production cost and revenues.
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