Which costing method is primarily used for internal decision-making?
Practice Questions
Q1
Which costing method is primarily used for internal decision-making?
Absorption costing
Marginal costing
Standard costing
Job costing
Questions & Step-by-Step Solutions
Which costing method is primarily used for internal decision-making?
Step 1: Understand what costing methods are. Costing methods help businesses determine how much it costs to produce goods or services.
Step 2: Learn about marginal costing. Marginal costing is a method that only considers variable costs (costs that change with the level of production) and ignores fixed costs (costs that do not change with production levels).
Step 3: Recognize the purpose of internal decision-making. Internal decision-making involves making choices within a company to improve efficiency, reduce costs, or increase profits.
Step 4: Connect marginal costing to internal decision-making. Since marginal costing focuses on variable costs, it helps managers understand how changes in production levels affect costs and profits, making it useful for internal decisions.
