Which of the following is a reason for companies to use absorption costing for internal accounting?
◦ It is the required inventory method for internal accounting as per GAAP.
◦ It measures the cost of all resources, whether manufacturing or nonmanufacturing, necessary to produce inventory.
◦ It does not take into account fixed manufacturing overhead while valuing inventory and hence is more suited for decision making.
◦ It can help prevent managers from taking actions that make their performance measure look good but that hurt the income they report to shareholders.