Absorption Costing and Variable Costing


On completion of the study of the chapter, you should be able to understand:

  • What is Absorption Costing?
  • Features, advantages and limitations of Absorption Costing.
  • What is Variable Costing?
  • Features, advantages and limitations of Variable Costing.
  • Distinction between Absorption Costing and Variable Costing.
  • How profit is determined under Absorption Costing and Variable Costing?

Absorption Costing may be defined as the technique which takes into account both Fixed and Variable Costs for determining unit cost of the goods produced or the operation carried on.

The Chartered Institute of Management Accountants (CIMA), United Kingdom, defines Absorption Costing ...

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