Variable Costing Income Statement
The income statement is one of the three main financial reports used by all businesses, from small to large businesses. While income statements may seem overwhelming at first, they are an essential part of doing business and you will soon come to appreciate the valuable information they provide to your business. When used together, the income statement, balance sheet, and cash flow statement provide a clear picture of your company’s overall financial position and serve as useful tools for analysis, planning, and decision-making.
Sometimes companies use variable costs for internal reporting of financial statements. In variable costing income statement , only direct costs (material, labor, overhead variances) are considered part of the product cost. The remaining manufacturing overhead is considered a recurring expense and will be deducted from the gross profit for that period.
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