Asked by Lisbeth Molina on May 13, 2024
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Given the following data,total product cost per unit under absorption costing will be greater than total product cost per unit under variable costing.
Absorption Costing
Absorption costing is an accounting method where all of the manufacturing costs, including both fixed and variable costs, are allocated to produced units, thus encompassing direct materials, direct labor, and overheads.
Variable Costing
An accounting method that only includes variable production costs (direct labor, direct materials, and variable manufacturing overhead) in product costs, excluding fixed overhead.
Product Cost
Product cost refers to the total expenses incurred to create a product, including direct labor, materials, and allocated overhead.
- Acquire knowledge about the essential aspects of absorption costing and the method by which it accounts for the total cost of production.
- Identify the distinctions between absorption and variable costing, focusing on how they report income and manage costs differently.
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Learning Objectives
- Acquire knowledge about the essential aspects of absorption costing and the method by which it accounts for the total cost of production.
- Identify the distinctions between absorption and variable costing, focusing on how they report income and manage costs differently.
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