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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)
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Source: Best Practices in Costing, Management Accounting PowerPoint Slides: Absorption Costing Method PowerPoint (PPT) Presentation, PPTLab
OVERVIEW
Costing Cost Reduction Assessment Management Accounting Strategic Sourcing Activity Based Costing Business Case Development Process Analysis Personality Types Financial Analysis Financial Management Pricing Strategy Quick Changeover Human Resources Process Improvement Consulting Training Change Management Change Resistance Quality Management & Assurance Cost of Quality Cash Flow Management Budgeting & Forecasting
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