when is it appropriate to use absorption costing 
absorption costing is typically used in situations where a company wants to understand the full cost of producing a product or providing a service this includes cases where a company is required to report its financial results to external stakeholders such as shareholders or regulatory agencies absorption costing is also often used for internal decision making purposes such as determining the selling price of a product or deciding whether to continue producing a particular product in these cases the company may use absorption costing to understand the full cost of producing the product and to determine whether the product is generating sufficient profits to justify its continued production 