Absorption cost per unit is the best product cost to use for one-time-only special order decisions.

Question

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs in the product cost, including fixed manufacturing overhead. This can result in overstated product costs and may not be the best cost to use for one-time-only special order decisions. Instead, variable costing or contribution margin should be used to determine the product cost and make a decision based on the incremental revenue and costs associated with the special order.

Absorption Cost Per Unit Is the Best Product Cost to Use