The Coca-Cola company uses variable costing. Variable manufacturing costs and direct costs are
assigned to the end of the product. The costs are accumulated and distributed to individual products
of the manufacturing process. They are considered as the cost of goods sold (COGs) when there is
a sale. Fixed manufacturing overhead costs are treated as expense in the period of occurrence. The
Coca-Cola company uses the accrual method to reduce the costs. However, it is unlikely that the
variable costs will be reduced. This happens because the price of the materials in the market are
stable. The company cannot compromise on the quality of its products. The rely on the long-term
strategy to reduce the costs of its produce.
Variable costing method
The Advantage of variable costing is that profit is shown after all the bills and expenses have been
paid. Payment of the expenses first happens for a period even if some inventory has not been sold.
The sales are made al the sales becomes the income surplus. The disadvantage is that full payment
of fixed-overhead expenses has to be paid in full for t...
15 Million Students Helped!
Sign up to view the full answer