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Variable Costing
A managerial accounting method that includes only variable production costs (materials, labor, and overhead) in product costs, treating fixed manufacturing overhead as an expense of the period.
Absorption Costing
An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.
Net Income
The total profit of a company after all expenses and taxes have been deducted from total revenues.
Operating Leverage
A measure of how revenue growth translates into growth in operating income, highlighting the fixed versus variable costs structure of a business.
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