What Is Full Costing?

Full costing is also called "absorption costing". "Variable costing" symmetry. According to the traditional concept of cost, a kind of cost calculation that includes all manufacturing costs, including direct materials, direct wages, and manufacturing costs, into product or labor costs. The products sold in the current period and the products not sold at the end of the period have exactly the same cost components, which can better meet the needs of preparing external statements and tax (income tax) declarations. The disadvantage is that the calculation of instalment profit and loss based on it, because the current income only bears the fixed costs allocated to the cost of sales, even if the product price and cost level remain the same, the amount of profit and the increase or decrease in sales cannot be maintained corresponding The proportion may even increase the profit of the enterprise due to the increase in the final inventory of the finished product, which is not easy for the management to understand. The variable cost calculation can better overcome this shortcoming. A better approach is to use a combination of the two cost calculations, taking into account both the internal and external needs of the enterprise. ^[1]