Because the absorption-cost approach includes allocated fixed costs, it does not clarify how the company’s costs...

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Accounting

Because the absorption-cost approach includes allocated fixedcosts, it does not clarify how the company’s costs will change asthe sales volume changes. Identify three specific reasons why somemanagers prefer the variable-cost approach.

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Three specific reasons why managers prefer variable cost approach 1 Effective Cost Control Under Variable cost approach behavior of cost items is identified and classified into Fixed and Variable costs By classifying the costs into fixed and variable costs the management is better able to control costs Since Fixed costs do not change with change in level of output the management hence the production department focuses on controlling only the variable costs Fixed costs like insurance administrative expenses See Answer

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Because the absorption-cost approach includes allocated fixed costs, it does not clarify how the company’s costs...

70.2K

Verified Solution

Question

Accounting

Because the absorption-cost approach includes allocated fixedcosts, it does not clarify how the company’s costs will change asthe sales volume changes. Identify three specific reasons why somemanagers prefer the variable-cost approach.

Answer & Explanation Solved by verified expert

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