Absorption Costing

 

 

Absorption Costing

Absorption costing is a costing method in which all costs of manufacturing a particular item/ product including both fixed and variable are made part of the product cost of the said item/ product. In other words, the cost incurred to produce a single unit of a specific product will include costs of:

  • Direct material
  • Direct labor
  • Variable manufacturing overhead
  • Fixed manufacturing overhead

 

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