absorption costing

  

Definition

A method of costing a product in which all fixed and variable costs are apportioned to cost centers where they are accounted for using absorption rates. This method ensures that all incurred costs are recovered from the selling price of a good or service. Also called full absorption costing. See also direct costing, marginal costing.

Use absorption costing in a sentence

  • Our company will be reorganized financially to account for all fixed and variable expenses using a type of absorption costing system, which in turn will ensure financial transparency.

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  • Absorption costing helped us determine inefficiencies in our supply chain as we wanted to ensure we were operating with maximum efficiency.

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  • The absorption costing was something of great confusion to all of us and it made us all feel miserable and unable to do anything.

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