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.