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Essay text:
This difference in the amount of fixed overhead expensed indicates the difference in profit under absorption and variable costing.
2) Would you recommend variable or absorption costing as a source of information for managers? Explain your answer.
Variable costing can be a valuable tool for managers when they have to make short term decisions to either make or buy a part and the pricing. In making this decision, managers can ignore fixed costs in the short term as these costs will be incurred in any case so the variable costs will provide the manager with a good measure of the differential costs that need to be evaluated...
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