Question: 1. What are the advantages of Variable Costing and the Contribution Approach? Explain each and provide examples.
2. Absorption Costing meets the requirement Matching Principal; explain how and compare this concept to Variable Costing.
3. In what ways does management find Variable Costing more useful?
4. In large manufacturing environments, labor costs are insignificant and fixed overhead costs are huge, such as Ford Motor Corp. In such cases, how can increase of production affect profit? Explain using each of the two methods of costing system:
A) Variable Costing
B) Absorption Costing
C) Discuss how Ford uses these analyses in business decisions.