Income statements prepared on an absorption-costing basis normally are more useful for internal decision making than income statements prepared on a direct costing basis.

Question

Quizplus · Accepted Answer

Absorption costing includes fixed manufacturing overhead in product costs, which can obscure the impact of production volume on profitability, making direct costing more useful for internal decision-making.

Income Statements Prepared on an Absorption-Costing Basis Normally Are More