Absorption costing is more appropriate than variable costing for making decisions relating to expansion of production capacity of a plant.

Question

Quizplus · Accepted Answer

Absorption costing takes into account all production costs, including fixed costs, while variable costing only considers variable costs. When making decisions about expanding production capacity, it is important to consider all costs that will be incurred, including fixed costs that will increase as the plant expands. Therefore, absorption costing is more appropriate for this type of decision-making.

Absorption Costing Is More Appropriate Than Variable Costing for Making