Why Is Variable Costing Used for Internal Reports

question 144

Multiple Choice

Why is variable costing used for internal reports?

• A) It can also be used for external reports.
• B) It is readily available through most computer systems.
• C) It removes the impact of changing inventory levels from the financial results.
• D) B and C

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Definitions:

Discount Rate

The interest rate used to determine the present value of future cash flows or to evaluate the attractiveness of an investment.

Opportunity Cost

The cost of an alternative that must be forgone in order to pursue a certain action, essentially the benefits you could have received by taking another course of action.

EVA

Economic Value Added, a measure of a company's financial performance based on the residual wealth calculated by deducting its cost of capital from its operating profit.

Operating Income

This metric reflects the profits earned from a company's core business operations, excluding non-operating income and expenses.