Managers can use variable costing information for internal decision making, but they must use absorption costing for external reporting purposes.

Question

Quizplus · Accepted Answer

Variable costing is useful for internal decision-making as it provides insight into the impact of fixed and variable costs on profitability. However, absorption costing is required for external financial reporting under generally accepted accounting principles (GAAP) because it includes all manufacturing costs in product costs.

Managers Can Use Variable Costing Information for Internal Decision Making