Under GAAP,
A)absorption costing is required to be used for the costing of inventory for external reporting purposes.
B)net income highlights differences between variable and fixed costs.
C)measured net income is often used externally to evaluate performance, justify cost increases, or evaluate new projects.
D)measured net income is often used internally to evaluate performance, justify cost increases or evaluate new projects.

Question

Quizplus · Accepted Answer

Under GAAP, absorption costing is required for external financial reporting because it includes all manufacturing costs (fixed and variable) in inventory valuation, aligning with the matching principle.