Assets represent future income, and under absorption costing the income statement may show a higher asset value than the company actually has. For example, the company produced 600 units at a cost ...

Depending on a company’s level of transparency, an income statement using absorption costing may break variable direct costs and fixed direct costs into two line items or combine them to report ...

Companies can use absorption, variable, or throughput costing for internal reports. The U.S. Securities and Exchange Commission (SEC) and GAAP are primarily concerned with external reporting.

GAAP-Approved Costing Methods. The generally accepted accounting matching principle requires manufacturing and service businesses to include direct and overhead expenses in product and service ...