The method where production costs incurred are included in the cost of manufacturing inventory and finance and administration costs are treated as period costs is known as the:

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The absorption cost approach, also known as the full-cost approach, includes all production costs incurred in the cost of manufacturing inventory. Finance and administration costs are treated as period costs and are not included in the cost of inventory. The direct cost approach only includes direct materials, direct labor, and sometimes direct expenses in the cost of inventory, while the joint cost approach is used for situations where multiple products are produced from a common set of inputs.

The Method Where Production Costs Incurred Are Included in the Cost