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Accounting 3 Pages

Variable And Fixed Costs

Question

•Explain the main differences between the absorption and contribution
(behavioral, variable) income statements. Will net income always be the
same under the two approaches? If not, explain the difference.

•Comment specifically on why companies feel the need to create yet
another income statement in a different format. What information can the
company gleam from this approach which is helpful as a tool in the
decision making process.

•Explain situations in which break-even analysis can be a useful tool. Provide a specific example.

Solution

Title: Variable And Fixed Costs
Length: 3 pages (910 Words)
Style: APA

Preview

VARIABLE AND FIXED COSTS.

Every business in operation incur costs, these costs may be classified as either fixed or variable costs. Fixed costs are the costs that are incurred and do not vary as sales levels per unit of a product vary. Categories of fixed costs are such as professional fees, insurance, premises costs, staffing, stock, sales and marketing.  Variable costs or direct costs are those that increase as the sales level of your products increase. Variable costs may include shipping costs, packaging, commissions and direct wages.

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