ECONOMICS

Detailed explanation-1: -TRUE 1. In an income statement prepared as an internal report using the variable costing method, variable selling and administrative expense would be used in the computation of the contribution margin TRUE 2.

Detailed explanation-2: -A variable costing income statement is one in which all variable expenses are deducted from revenue to arrive at a separately-stated contribution margin, from which all fixed expenses are then subtracted to arrive at the net profit or loss for the period.

Detailed explanation-3: -Variable Costing is often used for internal decision-making. This is the costing method used for the contribution format income statement. Variable costing classifies costs based on their behavior when the activity level changes: variable or fixed costs.

Detailed explanation-4: -Why Variable Costing is Not Used in External Reporting. There are no uses for variable costing in financial reporting, since the accounting frameworks (such as GAAP and IFRS) require that overhead also be allocated to inventory.

Detailed explanation-5: -o Variable and fixed selling and administrative expenses are treated as period costs and are deducted from revenue as incurred.