Absorption costing: It is a costing in which the company includes all the cost including the fixed costing in order to determine the cost of a product. It is the costing method that a company is required to use for calculating and filing its taxes. Variable costing: It is the costing which includes all type of variable cost. It is an accounting method used to allocate production to its cost and it is done during the period. To indicate: The Comparison of the two Income Statements

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Chapter 5, Problem 6.5GAP

To determine

Absorption costing:

It is a costing in which the company includes all the cost including the fixed costing in order to determine the cost of a product. It is the costing method that a company is required to use for calculating and filing its taxes.

Variable costing:

It is the costing which includes all type of variable cost. It is an accounting method used to allocate production to its cost and it is done during the period.

To indicate:

The Comparison of the two Income Statements

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