Advantages of Variable Costing Posted by birendra kunwar on 6:48 AM

The main advantages of variable costing are :

(1) Variable costing is a simple and easy method . It is less confusing.

(2) Fixed costs are excluded in cost of production and hence it avoids the complication of over or under absorption of fixed manufacturing overhead.

(3) It provides useful data for managerial decision making.

(4) It helps the management in pricing.

(5) It allows for compatibility with standard costing and budgeting.

(6) The clear cut division of costs into fixed and variable cost paves the way for better and efficient cost control .

(7) The profit under variable costing depends upon the sales volume . Profit in variable costing is not affected by changes in inventory as it is in absorption costing. In absorption costing, both sales and production influence profit.

(8) Variable costing is very useful in management reporting.