________ is used for external reporting.
A)Absorption costing
B)Variable costing
C)Direct costing
D)Activity-based costing

Question

Quizplus · Accepted Answer

Absorption costing is generally used for external reporting as it follows the Generally Accepted Accounting Principles (GAAP) and includes all production costs, both fixed and variable, in the cost of the product. This provides a more accurate representation of the cost of goods sold and inventory valuation, which is important for external reporting purposes such as financial statements, tax returns, and regulatory compliance. Variable costing and direct costing are more suitable for internal decision making, while activity-based costing is used for more detailed cost analysis and process improvement.

________ Is Used for External Reporting