Under absorption costing, the costs assigned to units of product include both variable and fixed costs.
What is absorption costing?
Absorption costing is the costing technique that allocates fixed overhead costs and variable costs to all units produced within the period. It is not the same as variable costing. Variable costing does not allocate fixed overhead costs to the units produced but reports them as expenses. This means that fixed overhead costs do not form part of the Cost of Goods Sold under variable costing.
Thus, under absorption costing, the costs assigned to units of product include both variable and fixed costs.
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