Variable costing is a costing method under which those costs of production that vary in relation to output are treated as product costs, it is commonly compared to absorption costing which is a method that treats all production costs as product costs regardless whether they are fixed or variable. Using variable costing can be beneficial to stakeholders due to the advantages in holds over the absorption costing. For instance, under variable costing, profits move in the same direction as sales since the profit for a period is not affected by changes in inventories considering factors such as costs, selling prices etc. are constant. This is an advantage to the stakeholders who are more concerned about the profits from which they benefit. When variable costing is used it is also easier to estimate the profitability of products, customers, and other sections of the business. When absorption costing is used, profitability is made incomprehensible by capricious allocations of fixed costs. The other advantage that variable costing...

It has to be noted however that most managers do not prefer variable costing and would rather use absorption costing for both internal and external reporting (Accountingformanagement.com, 2009).
References

Accountingformanagement.com (2009). Advantages of variable or direct or marginal costing system. Retrieved on March 27, 2010 from http://www.accountingformanagement.com/advantages_of_variable_costing.htm

Eldenburg, L.G. & Wolcott, S. (2005). Cost management: Measuring, monitoring, and motivating performance. New York: John Wiley & Sons. pg. 86-99