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:

Triple Bottom Line

An accounting framework that incorporates three parts of sustainability: social, environmental, and financial performance.

Sustainable Development

Conducting business in a way that protects the natural environment while making economic progress.

Social Audits

Evaluations of an organization's social impact, policies, and practices, often concerning its contributions to social responsibility and ethical standards.

Environmental Scans

The process of gathering, analyzing, and dispending information for strategic purposes from the external and internal environments of an organization.