Consider the Following Statements About Absorption Costing and Variable Costing

question 37

Multiple Choice

Consider the following statements about absorption costing and variable costing:
I. Variable costing is consistent with contribution reporting and cost-volume-profit analysis.
II. Variable costing must be used for external financial reporting.
III. A number of companies use both absorption costing and variable costing.
Which of the above statements is (are) true?

• A) I only.
• B) II only.
• C) III only.
• D) I and II.
• E) I and III.

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Definitions:

Consumer Surplus

is the difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay.

Scented Candles

Candles infused with fragrance or essential oils that are used for aromatherapy or to create a pleasant atmosphere.

Marginal Utility

The added satisfaction or utility a consumer gains from consuming an additional unit of a good or service.

Consumer Surplus

The difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit to consumers.