Full costing entails:

Full costing, also known as absorption costing, involves accounting for all costs associated with the production of a product. This means it includes not only the direct costs such as materials and labor, but also a proportional share of indirect costs or overhead. By considering all costs, full costing provides a more comprehensive view of a product's total cost structure, which is essential for accurate pricing, profitability analysis, and inventory valuation.

This method contrasts with other costing approaches that might focus solely on direct costs or variable costs, which would omit significant overhead expenses. Therefore, using full costing enables organizations to understand the total investment in a product, ensuring that pricing strategies align with the comprehensive cost structure. It is particularly important for external financial reporting and in meeting regulatory standards, as it provides a complete picture of profitability related to each product.