Q-21-11RQ - Horngren'S Financial And Managerial Accounting

Question

Why is it appropriate to use variable costing when planning production in the short term?

Step-by-Step Solution

Answer

Answer

 

Because fixed cost is irrelevant in short run.

 

Step 1: Variable costing

Variable costing is based on variable costs and does consider fixed costs in decision-making.

Step 2: Use of variable cost in production planning

It is appropriate to use variable costing when planning production in the short term because the fixed cost is an irrelevant cost as it has been already incurred and not get affected by future decisions.