PPT - Absorption Costing | Cost Accounting - B Com PDF Download

 Page 3


Types Of 
Absorptio
n Costing
Job 
Order 
Costin
g
Proce
ss 
Costin
g
ABC 
Costin
g
Page 4


Types Of 
Absorptio
n Costing
Job 
Order 
Costin
g
Proce
ss 
Costin
g
ABC 
Costin
g
Record all costs.
Classify all the costs.
Direct cost are directly linked to the out put 
Allocate the Indirect costs to the service 
departments of a business.
Reallocate costs form support departments to 
production departments.
Calculate an 
overhead recovery 
rate.
Absorb both the 
direct and indirect 
costs (overheads) 
into individual 
products.
Page 5


Types Of 
Absorptio
n Costing
Job 
Order 
Costin
g
Proce
ss 
Costin
g
ABC 
Costin
g
Record all costs.
Classify all the costs.
Direct cost are directly linked to the out put 
Allocate the Indirect costs to the service 
departments of a business.
Reallocate costs form support departments to 
production departments.
Calculate an 
overhead recovery 
rate.
Absorb both the 
direct and indirect 
costs (overheads) 
into individual 
products.
Fixed costs are recovered-fixed costs are incurred in order to make output 
to make output so it is only fair to charge all output with a share of these 
costs.
Ensures that costs are fully recovered.
Encourages costs consciousness.
It is fair in that it uses appropriate methods for each overhead.
Identifies total costs- this is useful where pricing is on a cost plus basis.
Identifies the profitability of different products and services.