Absorption costing is more appropriate when determining the product costs for long-term production planning.

Question

Quizplus · Accepted Answer

Absorption costing takes into account all manufacturing costs, both fixed and variable, and assigns them to each unit of product. This method provides a more accurate picture of the true cost of producing a unit and is therefore more appropriate for long-term planning decisions such as pricing strategies, product mix analysis, and capacity utilization.

Absorption Costing Is More Appropriate When Determining the Product Costs