The absorption costing approach to the income statement is used by companies for external financial reporting.

Question

Quizplus · Accepted Answer

The absorption costing approach is used by companies for external financial reporting as it includes all the costs associated with production, including direct costs like materials and indirect costs like overheads, in calculating the cost of goods sold. This method is required by Generally Accepted Accounting Principles (GAAP) for external financial reporting purposes.

The Absorption Costing Approach to the Income Statement Is Used