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Variable Costing

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Running head: ACCOUNTING 1
Variable Costing and Segmented Income Statement
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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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