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Meaning of Absorption Costing:
It is a method of costing by which all the manufacturing costs are absorbed by the units produced. In other words, it is a method of costing a product whereby all fixed and variable manufacturing costs are allocated to defined areas. In calculating this, direct labor, direct expense, direct materials and both variable and fixed manufacturing overhead are taken into account. The main difference between absorption costing and marginal costing is, in marginal costing fixed manufacturing overhead is not added to the product cost. Few points to note down about Absorption costing are:
Difficulties of Absorption Costing Assignment:
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