6

Question 1

Absorption Costing

full cost method

Answer 1

treats all manufacturing costs as product costs: including both variable and fixed costs.
includes: DM, DL, O/H (fixed and variable)
allocates a portion of fixed man o/h to each unit of product

Question 2

Variable costing

Answer 2

only the manufacturing costs that vary with output are treated as product costs.
*fixed man. o/h is treated as a period cost in this method.