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

question 120

Multiple Choice

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.

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Definitions:

Insider Trading

The unauthorized use of secret information for making profitable trades on the stock market to benefit oneself.

Exemption From Registration

A situation where a party is relieved from the requirement to register information or activities with a governmental or regulatory authority.

Components Assembly Corporation

A business specializing in the process of assembling parts to create finished products, often in the manufacturing sector.

SEC

Stands for the Securities and Exchange Commission, a U.S. government agency responsible for regulating the securities markets and protecting investors.