Reasons for using absorption Costing
There are mainly three reasons for using the absorption costing methods
1. Stock Valuation
Accurate Stock valuation is possible under absorption costing.
2. Financial Statements
Accurate financial statement can be prepared under the absorption costing system because under this method stock which is an important part of balance sheet and profit and loss account can only be accurately calculated under this system.
3.Product Pricing
Product pricing decision making can be made with the help of absorption costing.
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