Colossal Chocolate Company manufactures candy bars.Its gross receipts over the last several years have averaged $5 million.For budgeting and financial reporting purposes, the accounting department prepares financial statements using the variable costing approach.Under this approach, direct materials and labor are capitalized.Indirect costs that vary with production are capitalized, while fixed indirect costs are expensed.Colossal is not allowed to adopt this method of accounting for tax purposes.

Question

Quizplus · Accepted Answer

The passage states that Colossal uses variable costing for budgeting and financial reporting purposes, but is not allowed to adopt it for tax purposes. Therefore, the statement is true.

Colossal Chocolate Company Manufactures Candy Bars