What Is Responsibility Accounting? Compare and Contrast Financial-Based Responsibility Accounting

question 118

Essay

What is responsibility accounting? Compare and contrast financial-based responsibility accounting with activity-based responsibility accounting.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed overhead—in the cost of a product.

Net Operating Income

A measure of a company's profitability from its core business operations, excluding taxes and interest expenses.

Direct Labor Cost

The total cost of workforce directly involved in the production of goods or services, excluding indirect labor such as administration.

Variable Costing

A costing technique that only assigns variable production costs to inventory, helping managers understand the impact of production levels on total costs.