ECONOMICS

Detailed explanation-1: -Absorption costing allocates fixed overhead costs to a product whether or not it was sold in the period. This type of costing method means that more cost is included in the ending inventory, which is carried over into the next period as an asset on the balance sheet.

Detailed explanation-2: -Answer and Explanation: Under absorption costing the manufacturing fixed overheads are included as a cost of the product and allocated to per unit of the product and not as the period cost. So the cost will be expensed off at the time of sales as the product cost.

Detailed explanation-3: -Under absorption costing, fixed manufacturing costs are not expensed until the units are sold. Under absorption costing, variable manufacturing costs are treated as period costs. Under absorption costing, fixed manufacturing costs are treated as period costs.

Detailed explanation-4: -In marginal costing the full amount of fixed production overheads is written off in the period that it occurs. In absorption part of the fixed production overheads is carried between accounting periods as part of inventory valuations.

Detailed explanation-5: -Under absorption costing, fixed manufacturing overhead is treated as a product cost and hence is an asset until products are sold. Under variable costing, fixed manufacturing overhead is treated as a period cost and is immediately expensed on the income statement.