6 5 Compare and Contrast Variable and Absorption Costing Principles of Accounting, Volume 2: Managerial Accounting
Net income is derived by subtracting all expenses (COGS and operating expenses) from total sales revenue. The difference in the methods is that management will prefer one method over the other for internal decision-making absorption costing purposes. The other main difference is that only the absorption method is in accordance with GAAP. Over the year, …