Which of the following statements regarding service companies is true?
a. a service company's variable costing income statement includes manufacturing margin.
b. service companies use absorption costing to allocate fixed costs.
c. a service company would have no need to prepare a contribution margin report segmented by its various markets.
d. a service company's variable costing income statement includes contribution margin.

d. A service company's variable costing income statement includes contribution margin.

Explanation:

Variable costing can be defined as the costing that is obtained from variable manufacturing cost which includes the cost of direct labour, direct materials and the cost of manufacturing overhead of the product. Another name for variable cost is Direct cost.

Variable costing helps us to know what the price of a product would be. It can also tell us if we should continue producing that product or not. Variable costing helps us to control the cost of manufacturing a product.

A service company's variable costing income statement includes contribution margin. Contribution margin helps the services company to be able to pay for their variable cost using the revenue generated by the company. It is calculated as Selling price - Variable cost.