Questions:
1. Why would regression analysis provide a more accurate cost formula than the high-low method for a mixed cost?
2. How does absorption costing differ from variable costing in cost accumulation and income statement presentation?
3. What is meant by classifying costs (a) functionally and (b) behaviorally? Why would a company be concerned about functional and behavioral classifications?
4. Is variable or absorption costing generally required for external reporting? Why is this method preferred to the alternative?
5. Why does variable costing provide more useful information than absorption costing for making internal decisions?
6. What are the income relationships between absorption and variable costing when production volume differs from sales volume? What causes these relationships to occur?