Question

​Winters, Inc. is preparing financial statements to be distributed to investors and creditors. The company should prepare the income statement using A. absorption costing because it follows GAAP. B. absorption costing because it is better for controlling purposes. C. variable costing because it is better for planning purposes. D. variable costing because it follows GAAP.

Answer 1

A) absorption costing because it follows GAAP.

Step-by-step explanation:

Absorption costing method is required for external reporting under generally accepted accounting principles (GAAP ).

The main advantage of using the absorption costing method is that it includes all costs associated with the manufacturing processes assigned to the manufactured units.