DEFINITION OF ABSORPTION COSTING AND ITS ADVANTAGES & DISADVANTAGES
Absorption costing is a costing method that includes all manufacturing costs — direct materials, direct labor and both variable and fixed manufacturing overhead in the cost of a unit of product. Absorption costing is also referred to as the full cost method. Because absorption costing includes all cost of production as product costs.
Absorption costing is a tool that helps to determine the end-to-end cost of producing a service or a product. It offers an accurate view of the costs that occur to produce an inventory. It includes variable and fixed costs that are needed for manufacturing a product. ………..
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