Question

Consider the following statements about variable costing. Which of the following are true? The accounting standards...

Consider the following statements about variable costing. Which of the following are true?

  1. The accounting standards do not permit variable costing to be used for internal reporting (i.e., reports that are circulated only amongst employees who work for a particular organisation)
  2. Variable costing treats all variable costs (i.e., variable manufacturing and variable non-manufacturing costs) as inventoriable costs
  3. By lowering production of output (while holding the output price, volume sold and fixed cost constant), an organization that uses variable costing will experience higher profits

Group of answer choices

Statement 1 only

Statement 2 only

Statement 3 only

Statement 2 and 3 only

None of the statements are true

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Answer #1
None of the statements are true
Variable costing can be used for internal reporting. The accounting standards do not permit variable costing to be used for external reporting .
Variable costing treats only variable manufacturing costs as inventoriable costs.
By lowering production of output, variable costing income will be unaffected.
So none of the given statements are true.
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