WEEK V. CRITIQUE OF ABSORPTION COSTING. Accounting, Finance, SPSS

CRITIQUE OF ABSORPTION COSTING
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Introduction
Absorption costing can get defined as the accounting cost method which declares all entire costs in the provision of a product or service. The full manufacturing and overheads whether directly or indirectly incurred are accounted for in the ascertainment of a product or service cost.
Absorption costing
Costing for absorption is the aggregate of all the immediate costs caused by creating the merchandise. It is the cost in bookkeeping strategy where the object is included in complete expense. It not only includes the cost of resources and research but also integrates the overheads that can be set (Geiszler, Baker & Lippitt, 2017). The critics to absorption costing base their assumption on the higher net operating income achieved in the short run. This is so due to the fact that fixed overheads get charged to the product cost deferring the value of overheads charged to the ending inventory costs. Some examples to this statement include:
First, plant managers can adjus...