Absorption rates-HELP

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I am in the process of revising for my ECR exam the end of this month but seem to be having some trouble working out absorption rates. No matter how the question is worded I don't know how to start answering the question. Does anyone know of a simple way to work out absorption rates. Please help as I'm starting to panic about the exam now.<BR><BR>Dawn

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Absorption rates-HELP

    the absorption rate is simply a way of treating a fixed cost as a variable one. All figures for the calculation come from the budget. Calculate total fixed production costs for the period, then calculate the expected activity, generally machine or labour hours for the same period. Divide cost by hours and get a rate per hour. This is the Absorption Rate. If the unit of activity is not hours then simply replace the hours figure with the number of units or labour cost or whatever they say.

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