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(Please help me reply to a classmate. Thank you in advance. I appreciate it!) REPLY...

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Accounting

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(Please help me reply to a classmate. Thank you in advance. I appreciate it!)

REPLY Chapter 6, Question 4

Why would managers prefer variable costing over absorption costing?

Managers prefer variable costing because it provides a clearer understanding of cost behavior and how production levels impact profits. It aligns with the contribution margin concept, aiding pricing and break-even analysis. Variable costing is more suitable for short-term performance assessment, as it doesn't allocate fixed overhead costs to unsold products. This flexibility makes it valuable for decision-making, particularly in industries with changing demand. In contrast, absorption costing may be favored for external financial reporting to comply with accounting standards.

Reply to one (1) peer. select the initial reply of a classmate that answers a different prompt and reply. Reply with constructive criticism, a question to clarify, or a question to continue the conversation

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