The problem with using ________ is that it clouds the true relationships among price,volume,and costs by including fixed expenses in unit cost.
A)full-absorption costing
B)variable costing
C)contribution margin
D)break-even

Question

Quizplus · Accepted Answer

Full-absorption costing includes fixed expenses in unit cost, which makes it difficult to see the true relationships among price, volume, and costs. This can lead to inaccurate decision-making, as managers may not have a clear understanding of how changes in volume or price will impact profitability. Variable costing, on the other hand, only includes variable expenses in unit cost, which provides a more accurate picture of the true costs of producing a product or service. Contribution margin and break-even are related concepts that can be used in conjunction with either costing method to help managers make better decisions.

The Problem with Using ________ Is That It Clouds the True