For internal decision-making purposes,many companies use the income statement using the ________ approach.For external reporting,most companies use the income statement using the ________ approach.
A) absorption; absorption
B) absorption; contribution
C) contribution; absorption
D) full costing; variable costing

Question

Quizplus · Accepted Answer

For internal decision-making, many companies prefer the contribution approach because it separates fixed and variable costs, making it easier to analyze the impact of sales volume changes. For external reporting, generally accepted accounting principles (GAAP) require the absorption approach, which includes both fixed and variable manufacturing costs in the cost of goods sold.

For Internal Decision-Making Purposes,many Companies Use the Income Statement Using