Absorption and Contribution Income Statement Approach (Management Accounting Series)
This management accounting tutorial explores the difference between absorption and contribution income statement approaches. In management accounting, decision making is vital. Frequently we will use the contribution margin approach to make these decisions since variable costs are relevant if fixed costs are unavoidable. A key take away from this management accounting tutorial is that Absorption = DM + DL + variable overhead + fixed overhead (includes fixed), and Contribution = DM + DL + variable overhead (doesn't include fixed overhead!)
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