Question

which of the following is not a disadvantage of using variable costing as opposed to absorption costing

A) Variable accounting records do not conform to GAAP so two sets of records must be maintained of the company is required to file their statements publicly

B) owners equity tends to be understated

C) accounting records are more costly to maintain

D) only variable costs are assigned to inventory making poor management decisions

E) none of the above are disadvantages

Answer 1

Correct option
D) only variable costs are assigned to inventory making poor management decisions
When a decision needs to be taken whether to continue or dropping a product line
than variable costing can be used, in this case its not a disadvantage to use it.
But when only variable cost are assigned to inventory than for example dropping a
product line which is profitable can occur.
If any doubt please comment