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: -The direct costing model takes all the fixed cost to the income statement immediately. The absorption costing model assigns the fixed cost to units produced during the period. The two costing systems can produce different periodic income numbers if production and sales volume fluctuate, i.e. differ from each other.

Detailed explanation-3: -Absorption costing treats all production costs as product costs, regardless of whether they are variable or fixed. Under absorption costing, a portion of fixed manufacturing overhead is allocated to each unit of product.

Detailed explanation-4: -Absorption costing is one of the methods of calculating the cost of goods produced by the manufacturer. The technique includes both direct and indirect costs. Any cost related to the product’s manufacturing is considered, such as wages, materials, rent, and salaries. Hence, the given option is correct.