AccountingCode 9706
Absorption costing
What this topic asks you to be able to do
- the distinction drawn between cost centres and cost units
- how to share overhead expenditure out among production and service departments by allocation and apportionment
- how to choose a suitable basis and use it to calculate overhead absorption rates
- the reasons for, and the working out of, under-absorbed and over-absorbed overheads
- the process of drawing up costing and profit statements by means of absorption costing
- the applications and shortcomings of absorption costing
- how far absorption cost data assists managers in decision-making
- non-financial factors and why they matter