Costing Methods Essay

Polk come with is in the business of selling custom search lures. Recently they decided to introduce a new product. Before they introduce the product they would like to live on if variable or absorption costing is the best order for the company.Variable and Absorption Costing modeAbsorption costing is when all manufacturing costs are absorbed by the product and shows a high net income (Kieso, Kimmel, & Weygandt, 2011). Based on the 80,500 lures Polk lodge interchange in 2012, absorption costing is the preferred method to use because they switch a higher net income compared to the variable method.BenefitsThe benefit of absorption costing for Polk Company is they will show a higher net income of the products in inventory that are not sold immediately. On the contrary, if Polk Company uses variable costing they see any profit or loss closely immediately because all expenses are paid during the current accounting period, even if all the products are not sold.Competition and Bid dingAbsorption costing is the better costing method for Polk Company to use against a competitor who has submitted a lower bid. As stated previously, absorption costing does not require Polk Company to show any expenses on the products they are offering in the bid because they do not have to show expenses until after the products are sold.ConclusionIn conclusion, Polk Company should introduce the new fishing lures by using the absorption costing method, and for submitting product bids.ReferencesKieso, D., Kimmel, P., & Weygandt, J. (2011). Accounting Tools for Business Decision Making, 4e (4th ed.). Retrieved from The University of Phoenix eBook Collection database.