Absorption costing should be used when making special order decisions.

Question

Quizplus · Accepted Answer

Special order decisions should typically use variable or marginal costing because it considers only the costs that will change as a result of accepting the order, providing a clearer picture of the incremental profit or loss from the special order. Absorption costing includes fixed overheads in the cost of production, which may not change with the special order and can distort the decision-making process.

Absorption Costing Should Be Used When Making Special Order Decisions