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When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products that company is using

Sagot :

Parrain

Answer: Absorption costing

Explanation:

Absorption costing believes that all costs that went into the production of a good or service should be absorbed by/ apportioned to those same goods and services regardless of if the costs are direct or indirect.

It works by first assigning the direct costs such as labor and material and then it apportions the indirect costs such as the variable and fixed manufacturing overhead costs. Absorption costing is the preferred costing method for presenting financial statements outside the company by both IFRS and U.S. GAAP.

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