Question: Why do managers use variable costing for the income statement rather than absorption costing that is required by GAAP for the income statement? Because variable
Why do managers use variable costing for the income statement rather than absorption costing that is required by GAAP for the income statement? Because variable costing is easier for managers to understand and absorption costing is easier for our investors to understand. Because absorption has an incentive to overproduce whereas variable will incentivize producing what is needed for sales. Because variable costing saves on costs and managers should be incentized to control costs
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
