A variable costing income statement focuses attention on the relationship between costs and sales that is not evident from the absorption costing format.

Question

Quizplus · Accepted Answer

A variable costing income statement separates costs into fixed and variable categories and only includes variable costs in the cost of goods sold calculation. This allows for a clearer understanding of the impact of changes in sales volume on profitability. In contrast, absorption costing includes fixed manufacturing overhead in the cost of goods sold calculation, which can obscure the relationship between costs and sales.

A Variable Costing Income Statement Focuses Attention on the Relationship