Why Do Companies Use Variable Costing for Internal Financial Statements

question 21

Multiple Choice

Why do companies use variable costing for internal financial statements?

• A) Production volume variance does not affect variable costing income but it does affect absorption costing income.
• B) Variable costing does not create an incentive to produce additional unneeded units to increase net income.
• C) A sales-oriented company wants to track the effect of sales on net income.
• D) All of the above

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Definitions:

Somatic Symptom Disorder

A mental disorder in which a person has physical symptoms that involve more than one body part, but no physical cause can be found.

Postoperative Scar

The fibrous tissue that forms on the skin's surface as part of the natural healing process following surgery.

Leg Cramps

Involuntary and often painful contractions of the muscles in the leg, commonly affecting the calf muscles.

Somatic Symptom Disorder

A psychological disorder involving persistent and significant focus on physical symptoms, such as pain, that cause major distress or problems in functioning.