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Dear sir,
I have a doubt, please clarify me on this…..sir when we launched a new product in a market, so for that we have to incur heavy research and development cost….sir my question is how we spread this cost to product(under absorption costing) and under which head??…either we spread total cost in the year of occurrence or throughout the life of the product??Hi, Thank you for your question.
It is very unlikely that you’ll have an absorption costing calculation to perform directly in CIMA P2 exam. CIMA P2 focuses much more on modern / advanced costing methods such as throughput, ABC and the strategic usage of these.
To answer your question – in terms of research and development costs under traditional absorption costing, these would be classed as a non-manufacturing costs which would not be added to the product cost. They should either be written off in the period as an expense or in certain circumstances may be amortised over number of years depending on the nature of the development.
Hope that helps.
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