Absorption costing: Difference between revisions
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imported>Doug Williamson (Create page. Source: Oxford English Dictionary and Scott, Accounting for Business 3rd edition) |
imported>Doug Williamson (Add basis of allocation.) |
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Absorption costing assumes an estimated ''normal level of production'' for the purpose of allocating overheads. | 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. | |||
Latest revision as of 20:09, 6 February 2019
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.
