Absorption costing
System
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I am a bit confuzzled :?
When absorption costing do you only absorb the manufacturing costs of making a product? Or can you absorb all expenses to the business?
This sounds like a real stupid question but its been ages since I did all this and I cant even remember :shock:
Think I might need to go over all this again at some point :roll:
When absorption costing do you only absorb the manufacturing costs of making a product? Or can you absorb all expenses to the business?
This sounds like a real stupid question but its been ages since I did all this and I cant even remember :shock:
Think I might need to go over all this again at some point :roll:
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Comments
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Re:Absorption costing
I am sure you only apportion the manufacturing cost to the product. i.e. electricity, rent, canteen costs.
The point of absorbing is to allocate the cost to the product and I suppose if you think about it, expenses do not relate to the cost of the manufacturing the product. i.e. cost of say stationery is not a cost of manufacturing a unit.
Does this make sense.
Violet0 -
Re:Absorption costing
In terms of stock valuation, you could not absorb sales/distribution & administration overhead into products - because as we all know stock valuations used for financial accounting do not include them.
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