Absorption costing for decision-making.

Management Accounting (UK), October, 1997 by Lucas, Mike

Activity-based costing (ABC) is supposed to improve the decision-making and planning process, a principle recognized by Kaplan and Cooper's approach to ABC. It is generally accepted that absorption costs should not be implicated in decision-making but Zimmerman and others suggest that absorbing certain service/support fixed overhead costs, such as a works canteen, into unit or support costs can supplement Kaplan and Cooper's approach in an ABC system.

Mike Lucas, of the University of Buckingham, describing how absorbing certain fixed overhead costs into unit product costs can complement Kaplan and Cooper's approach to ABC, to improve the quality of palnning and decision making

Received wisdom has it chat absorption costs should not be used for decision-making,...

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