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.

Question

Quizplus · Accepted Answer

The use of variable costing prevents the buildup of excessive inventory by only including variable costs in the cost of goods sold, thereby removing the incentive to produce more inventory to absorb fixed costs. This promotes efficiency in inventory management and production.

Which of the Following Is a Reason for Companies Adopting