Why isn't variable costing used for external reporting purposes? Should it be allowed? Why or why not?

Please make your initial post by midweek, and respond to at least one other student's post by the end of the week.

Student's post to respond to:

Hello,

With external financial reporting, costs of inventory include all costs of production of inventory. This would include portions of production overhead that are connected to manufacturing.

This would also include all fixed and variable costs of overhead. However, variable costing treats these overhead costs as period costs. So variable costing is not used because it does not comply with the requirements of external reporting.

I do not think it should be allowed because it gives a form of misrepresentation for actual costs. These reports are most often used for outside investors and lenders. When reporting a companies financial statements, I think all costs should be utilized to give a more accurate account of the company.