Absorption costing is more widely used than variable costing.

Question

Quizplus · Accepted Answer

Absorption costing is generally preferred by companies for external reporting purposes as it includes all the production costs in the cost of goods sold, whereas variable costing only includes the variable costs. However, variable costing is useful for internal decision-making as it provides a clearer picture of the contribution margin and the impact of changes in production levels on profitability.

Absorption Costing Is More Widely Used Than Variable Costing