Compare and contrast the following two methods for determining the cost of a product or service: i) absorption costing and ii) activity-based costing.

Compare and contrast the following two methods for determining the cost of a product or service: i) absorption costing and ii) activity-based costing.

What are the advantages and disadvantages of the two costing approaches discussed in the first part of this question? (50% of the marks for question 1).

In answering, ensure that you outline any assumptions that you are making regarding the rationality of decision makers.