Absorption costing is the required method in use in most modern countries for reporting external inventory costs in the financials. Management often prefers this method to other conventional inventory tracking and measurement systems as it gives them a better feel for the true costs of inventory that is being carried.
Taking into consideration the benefits of absorption costing and management’s preferences, why do you feel that absorption costing might be a good choice for internal inventory measurement? Select one example for use in your explanation as to why this method might or might not be the best route to go for inventory.
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