Which type of costing system is required for external financial reporting?
A) Prime costing
B) Out-of-pocket costing
C) Absorption costing
D) Variable costing

Question

Quizplus · Accepted Answer

Absorption costing is required for external financial reporting as it includes all manufacturing costs, both fixed and variable, as part of the cost of a product. This method is also known as full costing and is required by generally accepted accounting principles (GAAP) for external financial reporting. Prime costing and out-of-pocket costing are not commonly used for external financial reporting. Variable costing is used for internal management decision-making.

Which Type of Costing System Is Required for External Financial