Absorption costing, also known as full absorption costing or total absorption costing, is a cost accounting method where all overheads of an organization are charged to production by means of absorption.
Absorption rate, also known as overhead absorption rate or recovery rate, is a crucial concept in absorption costing systems used to allocate overhead costs to production. This detailed guide covers the calculation methods, usage, and comparisons with modern costing systems.
Cash outflows are the financial transactions where a business expends cash, which is essential for managing liquidity and business operations.
Cost classification is the process of grouping expenditures according to common characteristics, facilitating the proper allocation and management of expenses within an organization.
Cost estimation is the process of predicting the cost of a project, product, or service by assessing the unit costs of direct costs and overheads for the purposes of planning, control, and pricing.
A method to establish the selling price of a product or service by estimating the total cost and adding a percentage mark-up to achieve a profitable price.
A detailed overview of equivalent units, explaining how unfinished units of production at the end of a period are measured and valued.
The Full Costing Method is an extensive approach in accounting that includes all the costs associated with producing a product or service, encompassing both direct costs and overheads allocated to the cost unit.
Indirect costs, also known as indirect expenses, are expenses that cannot be traced directly to a product or cost unit and are therefore considered overheads.
Job costing involves tracking the expenses linked to specific projects or jobs which are typically broken down into direct materials costs, direct labour costs, and overheads.
Manufacturing expenses, often referred to as manufacturing costs, encompass all the financial expenditures required to produce goods. These costs are crucial for businesses as they significantly impact pricing, budgeting, and overall profitability.
Oncost refers to the additional costs incurred beyond the direct expenses associated with employing personnel or handling and storing direct materials. These include wages oncost as well as materials and stores oncost.
Overheads, also known as burden in the USA, refer to the ongoing business expenses not directly attributed to creating a product or service. Understanding overheads is crucial for accurate financial reporting and cost management.
In accounting, stores oncost refers to the indirect costs or overheads associated with handling and storing materials used in production. These costs are not directly attributed to the cost of the raw materials themselves but are necessary for the overall production process.
