Two product costing methods commonly used in manufacturing companies are: absorption costing and variable costing. The difference between the two methods is that absorption costing treats fixed manufacturing overhead as part of product cost while variable costing treats it as period cost. The difference in the treatment of fixed manufacturing overhead creates the possibility that the two product costing methods produce different net incomes. The appropriateness of treating fixed manufacturing overhead as part of product cost under absorption costing was one of the controversial areas debated extensively in accounting literature during the 1950s and 1960s (Baxendale et al., 2006). The debates have been resolved on logical grounds in favor of absorption costing (Dugdale and Jones, 2003). In the past when direct labor made up a large portion of total manufacturing costs, the impact of product costing choices on net incomes being reported may not have been substantial in 1950s (Foster and Baxendale, 2008).