Why Have Many Companies Switched from Absorption Costing to Variable

question 212

Multiple Choice

Why have many companies switched from absorption costing to variable costing for internal reporting?
Variant question

• A)To increase bonuses for managers
• B)So the denominator level is more accurate
• C)To reduce the undesirable incentive to build up inventories
• D)To comply with external reporting requirements

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Definitions:

No Par Common Stock

is common stock that has been issued without a par value, meaning its value is not fixed in the company’s charter but is determined by the market.

Cash Price

The amount of money that a buyer must pay to purchase a good or service immediately without financing.

Paid-In Capital

Funds that a company raises by issuing shares of stock, representing the amount shareholders contribute in exchange for stock.

Treasury Stock

Shares that were issued and later reacquired by the issuing corporation, not considered when calculating dividends or earnings per share.