Question

Accountants prefer the variable costing method over absorption costing method for evaluating the performance of a company because select one:
a. by using the absorption costing method, income could appear to be higher by producing more inventory.
b. by using the absorption costing method, income could appear to be lower by producing more inventory.
c. by using the variable costing method, the cost of goods sold will be higher as more units are manufactured and sales remain the same.
d. by using the variable costing method, all fixed and variable costs are included in the unit cost of the product manufactured.

Answer 1

Accounts would likely prefer the variable of costing method over the absorption costing method in evaluating the performance of a company because with the use of the absorption costing method, the income will likely appear as higher in regards of producing an increase inventory. The correct answer is letter a.