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What is Absorption vs Variable Costing Explained about?
Absorption costing includes all production costs, including fixed overhead, as product costs. Variable costing only includes variable costs as product costs and treats fixed costs as period costs. Under absorption costing, fixed manufacturing overhead is allocated to inventory and cost of goods sold, while under variable costing it is expensed immediately. Absorption costing is used for external financial reporting to comply with matching and conservatism principles, while variable costing is used internall
- Author
- Joneric Ramos
- Language
- EN