Asked by Isabella Cardenas on Apr 24, 2024
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Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.
Absorption Costing
An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a product.
Full Costs
The complete cost of producing an item or providing a service, including direct, indirect, fixed, and variable costs.
Profitable
Describes a business or activity that generates more revenue than it spends in costs, resulting in a financial gain.
- Understand the basic principles of absorption costing and how it captures the full cost of production.
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Learning Objectives
- Understand the basic principles of absorption costing and how it captures the full cost of production.
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