Absorption Costing Method (PowerPoint PPT Slide Deck)

COST OPTIMIZATION PPT DESCRIPTION

The Absorption Costing method, also known as Full Costing and Full Absorption Costing, is a method for accumulating the costs associated with a production process and apportioning them to individual products. It is an inventory valuation and costing model that includes all manufacturing costs:

1. Direct Materials
2. Direct Labor
3. Overhead (Direct & Indirect)

Absorption Costing is often contrasted with Variable Costing or Direct Costing. Under Variable or Direct Costing, the fixed manufacturing overhead costs are not allocated or assigned to (not absorbed by) the products manufactured. Variable costing is often useful for management's decision-making. However, Absorption Costing is a Generally Accepted Accounting Principles (GAAP) requirement. Many people advocate Absorption Costing, because fixed manufacturing costs provide future benefits.

There are types of Absorption Costing Systems:

1. Job Order Costing
2. Process Costing
3. Activity Based Costing (also known as ABC Costing)

This PPT provides a comprehensive breakdown of the Absorption Costing method, detailing its application across various industries. It covers the three primary types of Absorption Costing Systems: Job Order Costing, Process Costing, and Activity Based Costing (ABC). Each system is explained with examples of industries where they are most effective, such as electronics for Job Order Costing and pharmaceuticals for Process Costing.

The presentation also includes a step-by-step overview of the production process, from introducing raw materials to selling finished goods. This detailed walkthrough ensures a thorough understanding of how costs are assigned and transferred at each stage. The document is designed to equip executives with the knowledge to implement Absorption Costing effectively within their organizations, ensuring compliance with GAAP and optimizing cost management.

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Source: Best Practices in Activity Based Costing, Absorption Costing, Cost Analysis PowerPoint Slides: Absorption Costing Method PowerPoint (PPT) Presentation Slide Deck, PPT Lab

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