Generally Accepted Accounting Principles Do Not Allow Variable Costing to Be

question 42

True/False

Generally accepted accounting principles do not allow variable costing to be used in external financial statements because absorption costing makes it easier for financial statement users to interpret year-to-year changes in reported income.

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Definitions:

Assembly Department

A section within a manufacturing facility where components are assembled into final products, often involving both human labor and machinery.

Direct Method

A costing method that directly allocates service department costs to producing departments without apportioning them among the service departments themselves.

Support Departments

Units within an organization that provide essential services and support to the main production or operational departments but do not directly contribute to the primary business product or service.

Machining Department

A specific department within a manufacturing facility where machining processes such as cutting, drilling, or milling are performed on materials.