Absorption Costing Flashcards
1
Q
What are the advantages of AC costing?
A
1) It includes the full costs of production offering better information than MC.
2) Suitable for businesses with uniform production demand.
3) Is approved by IAS 2.
4) Fixed overheads are essential for production
2
Q
What are the disadvantages of AC costing?
A
1) Arbitrary allocation method which can be inaccurate.
2) Can lead to over/under absorption which skews profit and loss.
