Why is absorption costing used when 1) Most fixed costs accrue with time.
2) There are long production runs of identical products with little customisation. if these are not the case why absorption costing are not suitable?
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relating absorption costing
3y ago#1I am guessing that you are quoting from a question or an explanation of activity based costing, in which case the reasons that ABC is more suitable than traditional absorption costing are full explained in my free lectures on ABC.
These points are taken out from technical article from the acca website. I am having a hard time understanding why absorption costing is more suitable when fixed cost acrue over time? what is it trying to say. and why absorption costing is not suitable with large variety of products/ production complextion? I have watched your lectures on ABC costing
3y ago#3With traditional absorption costing we usually absorb fixed overheads on a per labour hour basis, which is fine if they are accruing over time. However this is not the case with all overheads which is why ABC is a better approach.
However I am again assuming that the article you refer to is about ABC, but unless you tell me which of the articles it is then it is impossible for me to be sure as to what it is discussing.
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