ECONOMICS

Detailed explanation-1: -Absorption costing, sometimes called “full costing, ” is a managerial accounting method for capturing all costs associated with manufacturing a particular product. All direct and indirect costs, such as direct materials, direct labor, rent, and insurance, are accounted for when using this method.

Detailed explanation-2: -Product costs under variable costing include only variable manufacturing costs. Absorption costing accounts for fixed manufacturing overhead as a product cost. Variable costing accounts for fixed manufacturing overhead as a period cost.

Detailed explanation-3: -What is Absorption Variance? The absorption variance represents the amount of labor and overhead costs that were not absorbed or charged to the products; they represent production costs that will never be recovered through the sale of the product.