Page 95 - BA2 Integrated Workbook STUDENT 2018
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Marginal and absorption costing
4.3 Treatment of fixed overheads
In marginal costing, the fixed costs actually incurred are deducted from
contribution earned in order to determine the profit or loss for the period.
In absorption costing, fixed overheads are absorbed into each unit of product
using a predetermined overhead absorption rate. An adjustment for under or
over absorption of overheads is necessary in absorption costing statements of
profit or loss.
Illustrations and further practice
Go over illustration 3
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