Final answer:
It is not a strict necessity for companies to use absorption costing if they make no variable-cost/fixed-cost distinctions or variable costing if they do. While absorption costing includes all costs, variable costing includes only variable manufacturing costs. Firms choose between these methods based on various business needs and goals.
Step-by-step explanation:
The question posed is whether companies that make no variable-cost/fixed-cost distinctions must use absorption costing, and those that do distinguish between these costs must use variable costing. This is not entirely accurate. Absorption costing, also known as full costing, includes all manufacturing costs, both fixed and variable, in the cost of a product. Therefore, a company could potentially use absorption costing without making a clear distinction between fixed and variable costs in its financial reports. On the other hand, variable costing only includes variable manufacturing costs in the cost of a product. Companies that distinguish between fixed and variable costs might prefer this method as it provides clearer insight into the marginal cost of production and operational efficiency.
In the short-run perspective, total costs are divided into fixed and variable costs. Fixed costs (sunk costs) should not factor into economic decisions about future production because they cannot be altered; they have already been incurred. Thus, fixed costs are usually ignored in variable costing. Conversely, variable costs provide current and future decision-making information as they can be changed and reflect the marginal cost of increasing production.
Ultimately, firms use either costing method based on their specific accounting needs, reporting requirements, and management goals, rather than the strict necessity posited in the initial statement.