Variable Costing
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Variable Costing

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Questions and Answers

According to the text, why do managers prefer variable costing?

  • It is easily understood and preferred for internal analysis (correct)
  • It simplifies the understanding of the income statement
  • It separates fixed and variable costs
  • It provides necessary information for cost volume profit analysis

    • According to the text, which statement is true about profit and losses in relation to sales revenue?

  • Profit and losses are only affected by inventory variation
  • Profit and losses are only affected by production variation
  • Profit and losses have no relationship with sales revenue (correct)
  • Profit and losses are affected by inventory and production variation

    • According to the text, how does variable costing simplify the understanding of the income statement?

  • By separating fixed and variable costs (correct)
  • By providing necessary information for cost volume profit analysis
  • By preparing the income statement in a contribution margin format
  • By being easily understood and preferred for internal analysis

    • According to the text, why is the income statement prepared in a contribution margin format under the variable costing system?

    <p>To provide necessary information for cost volume profit analysis</p> Signup and view all the answers

    According to the text, what is the relationship between the variable costing system and the standard costing system?

    <p>The variable costing system and the standard costing system are closely related</p> Signup and view all the answers

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