What is absorption costing?

Absorption costing

Absorption costing attempts to unitise overhead thereby including a proportion of the fixed cost incurred into each unit of production or service. In this way the cost of a unit of production or service will represent die full cost (i.e. both the fixed and variable costs). Absorption costing is required for all financial accounting statements used for the purpose of external reporting.

• ‘demonstrate the principles of!absolution- costing;.

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