Answer (B) is correct . In the short run, management decisions are made in reference to incremental costs without regard to fixed overhead costs because fixed overhead cannot be changed in the short run. Thus, the emphasis in the short run should be on controllable costs. For example, service department costs allocated as a part of overhead may not be controllable in the short run.
Answer (A) is incorrect because Determining the income of a product or functional unit requires absorption (full-cost) data.
Answer (C) is incorrect because Determining the costs for the federal government’s cost-plus contracts requires absorption (full-cost) data.
Answer (D) is incorrect because Absorption costing (full-costing) is currently required for tax purposes.
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