Reference no: EM131664496

Qusetion: Which of the following statements is not true regarding the use of variable and absorption costing for performance measurement?

a. The net income reported under the absorption method is less reliable for use in performance evaluations because the cost of the product includes fixed costs, which means the level of inventory affects net income.

b. The net income reported under the contribution income statement is more reliable for use in performance evaluations because the product cost does not include fixed costs.

c. Variable costing isolates contribution margins to aid in decision making.

d. The Internal Revenue Service allows either absorption or variable costing as long as the method is not changed from year to year, while U.S. GAAP only allows absorption costing.