For external reporting, which method of accounting for inventory is not allowed under GAAP?
A) Full costing
B) Variable costing
C) FIFO
D) Weighted average costing

Question

Quizplus · Accepted Answer

Variable costing is not allowed under GAAP for external reporting as it does not assign fixed manufacturing costs to inventory, which violates the matching principle. Only direct manufacturing costs are included in the cost of goods sold under variable costing, while fixed manufacturing costs are expensed in the period in which they are incurred. Full costing, FIFO, and weighted average costing methods are all allowed under GAAP for external reporting.

For External Reporting, Which Method of Accounting for Inventory Is