Which of the Following Is a Valid Reason for Using

question 132

Multiple Choice

Which of the following is a valid reason for using variable costing?

• A) Fixed production cost should be ignored when costing units of inventory since it is not essential to the production process.
• B) Absorption costing recognizes fixed costs as expense regardless of volume of production.
• C) Absorption costing may motivate managers to overproduce in order to increase profits.
• D) Under variable costing managers can increase profitability by increasing the volume of production.

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Definitions:

Dollar Return

The total amount of money gained or lost on an investment, expressed in dollars.

Preferred Stock

A class of ownership in a corporation with a specified dividend that is paid out before dividends to common stockholders and typically does not carry voting rights.

Annual Dividend

The total dividend payment a shareholder receives from a company in one year, often expressed as an amount per share.

Efficient Markets

A theory that suggests that financial markets are "efficient" in reflecting information about stock prices at all times.