Comparing absorption and marginal costing benefits

Steps:

• Identify absorption costing absorbs fixed overheads into unit costs, avoiding fixed/variable separation.
• Identify marginal costing separates fixed and variable costs for contribution analysis.
• Match choice A: absorption avoids separation; marginal aids limiting factor decisions via contribution per unit of resource.
• Eliminate others for mismatches in benefits.

Why A is correct:

• Absorption includes all costs in inventory per standard accounting (e.g., IAS 2), avoiding separation; marginal uses contribution (sales - variable costs) for limiting factor optimization.

Why the others are wrong:

• B: Vague phrasing; absorption attributes fixed costs but not uniquely to cost centres over marginal.
• C: Marginal undervalues inventory by excluding fixed costs, not recognized for external reporting.
• D: Marginal suits short-term via contribution; absorption better for full-cost selling prices long-term.

Final answer: A