Explain the Matching Principle

question 259

Essay

Explain the matching principle.

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Definitions:

Operations

Refers to the day-to-day activities involved in the running of a business that are essential for producing and delivering goods or services.

Variable Costing

An accounting method that includes only variable costs—direct materials, direct labor, and variable manufacturing overhead—in product cost calculations.

Absorption Costing

A product costing technique in accounting that involves adding direct materials, direct labor, and both kinds of manufacturing overhead—variable and fixed—to the product's cost.

Fixed Manufacturing Overhead

Costs that do not change with the level of production output, including rent, salaries of permanent staff, and depreciation of factory equipment.