Which of the following correctly identifies the best use for each costing method?
E. External reporting
P. Performance evaluations
S. Short-term capacity decisions
Absorption Variable Throughput
A)P S E
B)S E P
C)E P S
D)E S P

Question

Which of the following correctly identifies the best use for each costing method? 
E. External reporting
P. Performance evaluations
S. Short-term capacity decisions
Absorption Variable Throughput
A)P S E
B)S E P
C)E P S
D)E S P

Quizplus · Accepted Answer

Absorption costing is primarily used for external reporting as it is required by GAAP and IFRS. Variable costing is most suitable for performance evaluations as it separates fixed and variable costs, helping in assessing managerial performance. Throughput costing is appropriate for short-term capacity decisions as it emphasizes on maximizing production without considering fixed costs. Therefore, the best use for absorption costing is external reporting, for variable costing, it is performance evaluations, and for throughput costing, it is short-term capacity decisions. Choice C is the only option that correctly identifies the best use for each costing method.

Which of the Following Correctly Identifies the Best Use for Each