The absorption-cost approach is used by most companies for all of the following reasons except that
A) absorption cost information is readily provided by a company's cost accounting system.
B) absorption cost provides the most defensible bases for justifying prices to interested parties.
C) basing prices on only variable costs could encourage managers to set too low a price to boost sales.
D) this approach is more consistent with cost-volume-profit analysis.

Question

Quizplus · Accepted Answer

The absorption-cost approach includes both fixed and variable costs in the cost of a product, which is different from the cost-volume-profit (CVP) analysis that often focuses on how variable and fixed costs affect the profitability of a company. CVP analysis is more aligned with variable costing rather than absorption costing.

The Absorption-Cost Approach Is Used by Most Companies for All