Which of the following inventory costing methods shown below is required by GAAP (generally accepted accounting principles)for external financial reporting?
A)Absorption costing
B)Throughput costing
C)Direct costing
D)Variable costing

Question

Quizplus · Accepted Answer

Absorption costing is required by GAAP for external financial reporting as it takes into account all manufacturing costs (direct materials, direct labor, and overhead) when valuing inventory. This method is preferred over direct costing, variable costing, and throughput costing as it provides a more accurate reflection of the true cost of production.

Which of the Following Inventory Costing Methods Shown Below Is