BUSINESS ADMINISTRATION
ACCOUNTING FOR MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Internal reporting
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External reporting
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Published financial statements
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Investors
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Detailed explanation-1: -Direct costs are the expenses a business incurs directly to make a product or service, or buy a wholesale product for resale. (All other costs are considered to be indirect costs.)
Detailed explanation-2: -Absorption costing is required for external reporting under generally accepted accounting principles (GAAP). It includes all manufacturing costs in inventory, even those that do not increase the value of the product, such as indirect materials and indirect labor.
Detailed explanation-3: -"Variable costing” is an accounting decision-making tool that managers utilize for internal reporting purposes.
Detailed explanation-4: -Therefore, variable costing is not permitted for external reporting. It is commonly used in managerial accounting and for internal decision-making purposes.