A Guide to the New Language of Accounting and Finance

A

Absorption Costing, also known as full costing, is the method used by some companies to identify the total material and labor costs incurred in providing a service or a product and the amount would also include overhead costs such as administration, distribution, and sales costs. These additional costs, such as administration, are usually attributed to the accounting period in which the costs are incurred. Although absorption costing is normal in manufacturing companies, it is also used in other sectors. As some costs, such as administration, are fixed for a period irrespective of the amount of activity, the calculated cost per unit will fluctuate from one accounting period to another depending on the level of activity. A product that seemed ...