Why have many companies switched from absorption costing to variable costing for internal reporting?
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Many companies have switched from absorption costing to variable costing for internal reporting because variable costing avoids allocating fixed manufacturing overhead to products and directly charges only variable costs. This reduces the incentive to build up inventories at the end of a reporting period to decrease cost of goods sold and increase net income under absorption costing. It also provides a clearer understanding of the contribution margin and allows for better decision-making related to pricing and product mix. The other options (A, B, and D) are not valid reasons for switching to variable costing.

Why Have Many Companies Switched from Absorption Costing to Variable