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Variable Costing

Variable Costing

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Running head: ACCOUNTING 1

Variable Costing and Segmented Income Statement

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Institution Affiliation

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ACCOUNTING 2

Variable Costing and Segmented Income Statement

The current financial statements are at a risk of providing inconsistent and unbalanced

business information. Basically, financial statements should provide true, consistent, and clear

financial information. Nonetheless, the accounting institutions all over the world recommend for

the use of absorption costing which does not clearly show all the components of cost in an

income statement. In brief, absorption costing is an accounting method that consolidates all

business costs as product cost. In effect, it ignores the elements of variable costs and fixed costs

in production (Dury, 2008). To remedy this situation, financial governing institutions should

encourage for the use of innovative accounting methods such as variable costing and segmented

income costing. Noteworthy, this accounting method separates all the elements of costs in the

production of goods and services. Accordingly, it shows a clearer picture of the business

position. Evidently, detailed and clear information enables investors to determine which

companies they will invest. In turn, this affects the rate of growth and performance of an

organization. Effectively, this determines the overall economic program of a country.

Innovation

Measurement of Innovation

On a similar vein, it is important for businesses to be able to measure the level of

business innovation. In general, the level of business innovation directly determines the

probability of business success on future operations. In addition, it also shows how secure the

enterprise is from threats by competitors. Basically, the measure of innovation entails an

understanding of the key performance indicators that directly and indirectly affect a good or a

service (Dury, 2008). Evidently, each key performance indicator has an opportunity and a risk. In

essence, an increase in opportunities on the key performance indicators leads to an increase in

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Running head: ACCOUNTING 1 Variable Costing and Segmented Income Statement Student’s Name Institution Affiliation ACCOUNTING 2 Variable Costing and Segmented Income Statement The current financial statements are at a risk of providing inconsistent and unbalanced business information. Basically, financial statements should provide true, consistent, and clear financial information. Nonetheless, the accounting institutions all over the world recommend for the use of absorption costing which does not clearly show all the components of cost in an income statement. In brief, absorption costing is an accounting method that consolidates all business costs as product cost. In effect, it ignores the elements of variable costs and fixed costs in production (Dury, 2008). To remedy this situation, financial governing institutions should encourage for the use of innovative accounting methods such as variable costing and segmented income costing. Noteworthy, this accounting method separates all the elements of costs in the production of goods and services. Accordingly, it shows a clearer picture of the business position. Evidently, detailed and clear information enables investors to determine which companies they will invest. In turn, this affects the rate of growth and performance of an organization. Effectively, this determines the overall economic program of a country. Innovation Measurement of Innovation On a similar vein, it is important for businesses to be able to measure the ...
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