Absorption costing

Cost and management accounting.

Absorption costing is a method of costing which takes into account indirect costs (overheads) as well as all direct costs of production.

Absorption costing assumes an estimated normal level of production for the purpose of allocating overheads.

Overhead costs are then allocated on a relatively simple basis, such as labour hours or machine hours.

See also

• Accounts
• Activity-based costing
• Budget
• CertICM
• Corporate financial management
• Cost centre
• Costing
• Direct costs
• Financial reporting
• Fixed cost
• Job costing
• Forecast
• Management accounting
• Overheads
• Process costing
• Profit centre
• Variable cost