Accountants Prefer the Variable Costing Method Over the Absorption Costing

question 133

Multiple Choice

Accountants prefer the variable costing method over the absorption costing method for evaluating the performance of a company because

• A)by using the absorption costing method, income could appear to be higher by producing more inventory.
• B)by using the absorption costing method, income could appear to be lower by producing more inventory.
• C)by using the variable costing method, the cost of goods sold will be higher as more units are manufactured and sales remain the same.
• D)by using the variable costing method, all fixed and variable costs are included in the unit cost of the product manufactured.

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Definitions:

Avoid Conflict

The act of steering clear of disagreements and disputes, often to maintain harmony and prevent escalation in professional or personal contexts.

Conjoint Analysis

A statistical technique used in market research to determine how consumers value different attributes that make up a product or service.