- 1 Marks
Question
A method of product costing which aims to include, in the total cost of a product, an appropriate share of the organisation’s total overhead is:
A. Marginal costing
B. Activity-based costing
C. Differential costing
D. Absorption costing
E. Product costing
Answer
D. Absorption costing
Explanation:
Absorption costing is a costing method where both fixed and variable production costs are included in the total cost of a product. It allocates an appropriate share of the organization’s overheads (such as rent, utilities, and administrative costs) to the cost of each product. This method is required by accounting standards for external financial reporting.
- Tags: Absorption Costing, Activity-Based Costing, Costing Techniques, Product costing
- Level: Level 1
- Topic: Costing Methods
- Series: NOV 2014
- Uploader: Dotse