I'm assuming you are talking about Absorption costing which is essentially the opposite of Variable Costing.
Absorption Costing: Where all costs (Direct and Indirect) related to producing (Not Selling & Admin) a product are distributed evenly into the cost of the goods.
Lets say we only used $5 worth of materials and $2.50 worth of labour to make a doll. There is also $1000 worth of fixed expenses related to making the doll.
Under Variable Costing: the cost of making a doll is only the variable costs. Hence, the cost of 1 doll is 5+2.50 = $7.50/doll
Under Absorption costing: Lets say we made 100 dolls ($10/doll worth of Fixed costs). The total cost of a doll would therefore but 5 + 2.50 + 10 = $17.50/doll
I guess you could say that it absorbs the ALL the costs of manufacturing.
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