Variable Costing and Samanta Shoes Research Paper

Variable Costing and Samanta Shoes - Research Paper Example Transportation costs are directly proportional to production cost. Transportation of raw materials from one area will affect the shoe price. Materials that are outsourced from remote locations will, therefore, increase the price of the shoe. Research and development costs are directly proportional to the production cost of shoes. Increased research and development will lead to higher shoe prices. Manufacturing of new shoes based on intensive research will also lead to increased shoe prices. 2. Founders’ decision making is mainly influenced by the variable costing method that is mainly affected by production levels. Variable costs are directly proportional to production levels. Absorption costing allows incomes to increase as production levels rise. Use of absorption costing by the management artificially inflates the incomes of the company (Horngren, Datar, & Rajan. p 45). Absorption costing in the period of production depicts that fewer costs are incurred and more income for the