Which of the Following Is a Reason for Companies Adopting

question 3

Multiple Choice

Which of the following is a reason for companies adopting variable costing for internal reporting purposes?

• A) It is cost-effective to use variable costing for both internal and external reporting.
• B) It reduces the incentives for undesirable buildup of inventories.
• C) It measures the cost of all manufacturing resources, whether variable or fixed, necessary to produce inventory.
• D) It assists in accurate pricing decisions in case of long-run pricing.

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Definitions:

Straight-line Method

A strategy for computing depreciation or amortization through evenly apportioning the cost of an asset across its expected useful duration.

Semiannual Interest

Interest that is calculated and paid twice a year, commonly found in bonds and loans.

Present Value

A financial concept that represents the current value of a future amount of money or stream of cash flows given a specified rate of return.

Compounded Annually

The process of calculating interest on the initial principal, which also includes all the accumulated interest from previous periods on a loan or deposit.