After you have watched the video, Absorption and Variable Costing, enter this forum to compare and contrast Absorption Costing and Variable Costing. Identify the strengths and weaknesses of each approach and discuss how to mathematically reconcile the differences between the two approaches.
In this module you will have an opportunity to demonstrate your understanding of Absorption and Variable Closing and their application in the aviation industry.
For this Case Study complete the three requirements below:
- A supplier of aircraft parts to an aircraft manufacturer has noticed an increase in inventory. As a result of this, will absorption costing or variable costing income be greater for the supplier? Explain why?
- You are a management analyst for XYZ aircraft manufacturing company. Your company is considering either to use absorption costing or variable costing for internal financial analysis. Which method would you recommend and why would you recommend it?
- Refer to Case 8-43 at the end of Chapter 8.
- Build or use an existing Excel Spreadsheet and complete requirements 2, 3, and 4.
- Comment on the results obtained from requirements 2, 3, and 4.
- The spreadsheet must accompany the submission.
For this case study, you will demonstrate your ability to correctly calculate the problem and demonstrate creative thinking by analyzing the case and answering the questions that are intended to interpret the data. Please refer to the case study section of the syllabus for additional guidance and your Case Study Rubric to review the criteria that will be used to evaluate and grade your submission. This activity is due the last day of this module. If you have chosen to complete this activity as a group assignment (optional), one member of the group will submit the assignment. Include the names of all participating group members in the top left corner of the first page of the document.