EXERCISE 8-27 ABSORPTION AND VARIABLE COSTING 1
Exercise 8-27 Absorption and Variable Costing
Grand Canyon University: ACC650
, EXERCISE 8-27 ABSORPTION AND VARIABLE COSTING 2
EXERCISE 8-27
Introduction
Today, Coca-Cola is a global business which consist of the Coca-Cola company and
nearly 225 bottling partners worldwide (Coca-Cola, 2020). Coca-Cola markets, manufactures,
and sells beverage concentrates and syrups. The company also sells finished beverages which
include sparking soft drinks; water and sports drinks; juice, dairy, and plant-based drinks; and tea
and coffee (Coca-Cola, 2020).Typically,the company generates its net operating revenues by
selling concentrates and syrups to authorized bottling partners.These partners then combine the
concentrates with still and/or sparkling water, and/or sweeteners, depending on the product, to
prepare, package and sell and distribute finished beverages (Coca-Cola, 2020).
Considering Coca-Cola’s products and operations we will discuss the pros and cons of
absorption and variable costing as the basis for product costing.Both costing methods have
advantages and disadvantages, and a company must choose which accounting system fits their
needs. In the following section, the pros and cons of absorption and variable costing as the basis
for product costing will be discussed.
Pros and Cons of Absorption Costing
The pros of using absorption costing:
1. The main pro is that absorption costing complies with GAAP.
2. It can be more accurate when tracking profits, this would be even more beneficial prior to
the holiday seasons when they offer their seasonal promotions and ramp up production.
3. Taking into consideration that Coca-Cola has so many different products and work with
so many bottlingpartners, having a more complete portrayal of cost per unit for each
Exercise 8-27 Absorption and Variable Costing
Grand Canyon University: ACC650
, EXERCISE 8-27 ABSORPTION AND VARIABLE COSTING 2
EXERCISE 8-27
Introduction
Today, Coca-Cola is a global business which consist of the Coca-Cola company and
nearly 225 bottling partners worldwide (Coca-Cola, 2020). Coca-Cola markets, manufactures,
and sells beverage concentrates and syrups. The company also sells finished beverages which
include sparking soft drinks; water and sports drinks; juice, dairy, and plant-based drinks; and tea
and coffee (Coca-Cola, 2020).Typically,the company generates its net operating revenues by
selling concentrates and syrups to authorized bottling partners.These partners then combine the
concentrates with still and/or sparkling water, and/or sweeteners, depending on the product, to
prepare, package and sell and distribute finished beverages (Coca-Cola, 2020).
Considering Coca-Cola’s products and operations we will discuss the pros and cons of
absorption and variable costing as the basis for product costing.Both costing methods have
advantages and disadvantages, and a company must choose which accounting system fits their
needs. In the following section, the pros and cons of absorption and variable costing as the basis
for product costing will be discussed.
Pros and Cons of Absorption Costing
The pros of using absorption costing:
1. The main pro is that absorption costing complies with GAAP.
2. It can be more accurate when tracking profits, this would be even more beneficial prior to
the holiday seasons when they offer their seasonal promotions and ramp up production.
3. Taking into consideration that Coca-Cola has so many different products and work with
so many bottlingpartners, having a more complete portrayal of cost per unit for each
