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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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

Expert Solution

Step 1: Definition

Variable Cost:

The cost which is not fixed is called as variable cost. This cost is directly proportional to the level of output produced, it increase with increase in output and vice versa.

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