Consider the following statements about absorption costing and variable costing:
I. Variable costing is consistent with contribution reporting and cost-volume-profit analysis.
II. Absorption costing must be used for external financial reporting.
III. A number of companies use both absorption costing and variable costing.
Which of the above statements is (are) true?
A) I only.
B) II only.
C) III only.
D) I and II.
E) I, II, and III.

Question

Quizplus · Accepted Answer

- Variable costing aligns with contribution margin reporting and CVP analysis because it separates fixed and variable costs, making it easier to analyze the impact of sales volume changes.- Absorption costing is required for external financial reporting in accordance with generally accepted accounting principles (GAAP) because it includes all manufacturing costs in the cost of goods sold.- Many companies use both costing methods: absorption costing for external reports and variable costing for internal decision-making processes.

Consider the Following Statements About Absorption Costing and Variable Costing