BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Absorption Costing is not relevant for internal decision making. Absorption Costing is not acceptable for external reporting. Absorption Costing is suitable for planning and control. Operating profit will always be higher under Absorption Costing.

Detailed explanation-2: -Since absorption costing includes allocating fixed manufacturing overhead to the product cost, it is not useful for product decision-making. Absorption costing provides a poor valuation of the actual cost of manufacturing a product. Therefore, variable costing is used instead to help management make product decisions.

Detailed explanation-3: -Absorption costing reflects more fixed costs attributable to ending inventory. Absorption costing ensures more accurate accounting for ending inventory because the expenses associated with that inventory are linked to the full cost of the inventory still on hand.

Detailed explanation-4: -Absorption costing means that all the manufacturing cost i.e. raw material, direct labor, direct expenses and overheads are absorbed by the units produced. Costs includes fixed as well as variable both.

Detailed explanation-5: -Correct answer: Option c. both variable and fixed manufacturing costs are considered product costs. Explanation: Under absorption costing, the variable manufacturing costs and the fixed manufacturing overhead are considered as product costs.