There are two main techniques of cost ascertainment.
- Absorption Costing and
- Variable Costing
The basic difference between these two techniques is treatment of Fixed Manufacturing Overhead. In absorption costing Fixed Manufacturing Overhead are included in the cost of product but in variable costing Fixed Manufacturing Overhead are not included in the cost of product. Due to this reason “Cost of production or Product Cost is higher in Absorption Costing as compare to variable costing and ultimately value of closing stock becomes higher in Absorption Costing as compare to variable costing.