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What is the major rationale for the use of variable costing? Discuss why variable costing may not be used for financial reporting purposes.

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What is the major rationale for the use of variable costing? Discuss why variable costing may not be used for financial reporting purposes.

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Solution Summary

This solution outlines the principle of variable costing and discusses why it may not be used for financial reporting purposes.

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Under variable or direct costing, the fixed manufacturing overhead costs are not allocated or assigned to (not absorbed by) the products manufactured. Variable costing is often useful for management's decision-making. However, absorption costing is required for ...

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