A company may use absorption costing for external reporting and still choose to use throughput costing for internal reports.

Question

Quizplus · Accepted Answer

The company may use different costing methods for external reporting and internal decision-making purposes. Absorption costing is commonly used for external financial reporting purposes, whereas throughput costing may be used for internal decision making purposes as it provides more insight into the actual cost of production by only considering direct materials and direct labor costs.

A Company May Use Absorption Costing for External Reporting and Still