Compare and contrast absorption costing Assignment

comparison and contrast absorption apostrophizeing - Assignment ExampleAbsorption costing and Marginal costing argon two such costing methods. They differ to quite an extent, however whether one method is better than the other depends mostly on the situations in which they are applied and the underlying objectives of the businesses in which they are applied.Before look at these two concepts in detail, it is appropriate to discuss the components that make up the ultimate cost of a good or service. The cost of something can be broadly broken up into fixed cost and variable be. Fixed costs are those costs that are incurred irrespective of the level of production. So for example, in a garment factory business, fixed costs would include the rent on the factory. This rent would largely be the same, irrespective of the volume of garments produced in that factory. On the other hand, the variable costs would include the costs of the materials used (direct material), the daily wages of t he staff producing the garments (direct labour) and even by chance the electricity charges on the machines used (direct variable overheads). These costs increase directly with the volume of production. to a greater extent garments universe produced would mean more fabric being used, more people being employed or the same people being employed for longer and machines using more electricity by being worked for longer or at higher capacities.This method is also called the full costing method. As the nomenclature implies, under this method, the full cost of the good or service is used in arriving at the cost per unit. Full costs mean that both the variable costs and the fixed costs are include in the calculation of cost per unit. That is, this method does not differentiate between them-all the manufacturing costs are included.In the garment factory example mentioned above, this would mean that in addition to