Professional Documents
Culture Documents
Absorption costing
(Supporters of it see it as a cost
incurred due to production, hence treat
it on a per-unit basis and assign to
products to properly match revenues
and costs) in line with matching
principle; costs relating to units being
sold are recognized.
All inventories are kept very low Finished goods inventories are
minimal
Difference between variable and absorption income tends to disappear
*Over a period of time, eventually when total production = total units sold
over whole period; income reported under both methods would be the
same.