ACC 349WEEK 3 DQ 2 absorption costing

What are the differences between variable and absorption costing? Why is variable costing not allowed for GAAP reporting? Which method is more useful for internal decision making? Why? As a manager, which would you prefer? Why?

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According to our readings, Absorption costing is the approach used for external reporting under generally accepted accounting principles, in this approach cost of direct materials, direct labor, and both variable and fixed manufacturing overhead are assigned to a job in the other hand, when it comes to the variable costing, products cost are only direct materials, direct labor, and variable manufacturing overhead costs. The reason why GAAP reporting does not recognized variable costing is because GAAP requires that fixed manufacturing overhead be accounted for as a product cost. Another reason why the variable costing approach is not accepted is because it reports a lower taxable figure as the inventory increases, also it does not provides a proper matching of

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