Polk Company Review Essay

In this case, would it be wear out to custom the changeable or denseness hail manner, and why? In this case, it would be better to use the absorption order because this mode incorporates only the belt that is allocated to the 80,000 units sold. The variable star method counts fixed overhead as a period expense, meaning that the fixed overhead for this period is calculated on the reason of the 95,000 units produced, if the absorption method is used. The absorption method only calculates fixed overhead on the basis of the 80,000 units that were sold. This provides management with a much immaculate picture of the profitability of the fishing lures. Thus, the absorption cost method is optimal. What are the benefits of the two methods? on a lower floor absorption be system, the return cost consists of all variable as well as all fixed manufacturing be.. But when variable costing system is used, the fixed cost (both manufacturing and non-manufacturing) is do by as a pe riod cost and therefore is not included in the product cost. The ability to provide accurate information to management about product costs is the main benefit of the absorption method. The variable method is beneficial because it provides an production (net income) that is closer to the cash flow of the business. This is usable in particular for businesses that might be short on cash flow. Further, the variable costing method provides management with a clearer picture of the effect that fixed costs shake on the total profitability of the company (AFM, 2012). Which method would lead to the best decision when a competitor is submitting a lower bid for your product? assiduity costing is particularly useful for firms that do not sell all of their construct products during the accounting period, as is the case with Polk. Under absorption costing, the cost of a well is not shown until the good has been sold (Johnston, 2013). This put forward be a disadvantage if a portion of the go ods produced are ultimately not sold, as management would still have to know the cost of those goods.