INCOME INFLATION: ABSORPTION COSTING VS. VARIABLE COSTING.

In this paper, we will introduce a case study to consider opportunities for income expansion available to unethical administrators. When production exceeds sales, an increase in opportunities, in some cases, occurs at the cost of absorption,

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In this case we will consider opportunities for revenue expansion available to malicious administrators. These opportunities occur when production exceeds sales and are caused by the difference between absorption costs and variable costs. Absorption cost profit and loss statement is offered at three different sales levels, production has not changed. This case requires that students use this information to compile variable cost income statements at the same level, assuming that production is the same. In this case, students are also required to discriminate between fixed and variable costs, discuss ethical choices and discuss "advanced keynote lectures". The main theme of this case is to compare opportunities to increase revenue with GAAP based absorption cost accounting and internal variable cost calculation when generating more inventory.

Variable cost accounting is the concept of management accounting expenses. In this way manufacturing costs will occur during manufacturing of the product. This solves the problem of absorption costs and increases revenue as production increases. According to the absorption cost law, management can push products during the next product sales period. This is artificially exaggerating the profit in production at lower cost than the variable cost calculation system creates. Variable costing is not normally used for external reporting purposes. According to the 1986 tax reform law, the income statement must use absorption cost accounting to comply with GAAP.