The answer is absorption costing.
Absorption costing technique is basically used to reduce expenses, which increases operating income.
What is Absorption costing?
- We know that total cost is summation of fixed cost and variable cost. But absorption cost we consider the product cost only neither fixed cost nor variable cost.
- Incurred cost is recovered by selling price of goods and services. Absorption costing technique is basically used to reduce expenses, which increases operating income.
- There are two steps to increase net operating income, they are 1. Increase production. 2. Decrease in expenditure.
- Increase in production as more productivity as more income is generated. Decrease in expenditure- It causes to increase saving. When somehow production is fixed then we can reduce expenditure to maintain the saving.
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