Absorption Costing: Definition and additional resources from BNET
On CNET: iPhone 3G vs. BlackBerry Storm

BNET Business Dictionary

Business Definition for: Absorption Costing

  • an accounting practice in which fixed and variable costs of production are absorbed by different cost centers. Providing all the products or services can be sold at a price that covers the allocated costs, this method ensures that both fixed and variable costs are recovered in full. However, should sales be lost because the resultant price is too high, the organization may lose revenue that would have contributed to its overhead.
  • See also Marginal Costing

Additional Resources

Hayashi Construction, Inc.: a Business Method of Accounting Using Absorption Costing, Including a Method of Drawing a Break-Even Chart Was Admitted as a Patent by the USPTO
SAKATA, Japan -- Hayashi Construction, Inc. was awarded a U.S. patent for an invention entitled "Accounting System for Absorption Costing." Absorption costing is an accounting system generally and widely used in making an external income statement. Representative absorption costing is standard costing under absorption costing. Costing relative to the absorption...
Tags: accounting, U.S. Patent and Trademark Office
Research articles 2008-06-11
ABC v TOC: Same cloth as absorption v marginal, different style and cut.
The accounting response to the growth of advanced manufacturing technologies and related management philosophies is restricted by the adherence to obsolete costing methods, such as absorption costing, according to Goldratt. However many accountants claim The accounting response to the growth of advanced manufacturing technologies and related management philosophies is restricted...
Tags: ABC Inc., accounting
Research articles 1998-04-01
Criticisms Of Absorption Cost Systems: Inaccurate Product Costs
Activity Based Costing ABC method computes the overall product cost taking into account the cost involved in the intermediate activities leading to delivery of the final product. ABC refines costing systems by focusing on individual activities as the fundamental cost object. It assigns costs to cost objects based on the...
Tags: Activity Based Costing, Activity Based Costing Method, Managerial Accounting, Finance
Presentations 2003-01-01
Absorption costing for decision-making.
Activity-based costing ABC is supposed to improve the decision-making and planning process, a principle recognized by Kaplan and Cooper's approach to ABC. It is generally accepted that absorption costs should not be implicated in decision-making but ZimActivity-based costing ABC is supposed to improve the decision-making and planning process, a principle...
Tags: Activity Based Costing, Cooper, decision-making
Research articles 1997-10-01
STRATEGIC COST MANAGEMENT: An Activity-Based Costing Approach
This article discusses activitybased costing ABC as a strategic costing technique with the objective of demonstrating what makes it a superior costing technique in comparison to the traditional costing techniques. The article then discusses what really makes ABC a strategic costing technique. In doing this, the article highlights the significance...
Tags: ABC Inc., FINANCE, PRODUCTIVITY, technique
Research articles 2007-07-01
Austin Apartment Market Slows In Second Quarter
Despite Austin's robust first quarter postings, multifamily demand slowed slightly during the second quarter of 2007. Overall absorption totaled 253 units, down from 605 units in the first quarter and overall occupancy fell 0.32 points over the quarter to 92.98 percent. Austin area classes A, B and D housing experienced...
Tags: Austin, Quarter, O'Connor & Associates, C/C++, Programming Languages, Software Development, Software/Web Development
White papers 2007-08-02
Houston Apartment Market Update
After a dismal 2006 where annual absorption totaled -10,023 units, positive first quarter 2007 absorption figures were a welcome relief. The market absorbed a robust 2,539 units over the first three months of 2007, with all classes posting positive figures. The Class A market fared the best over the first...
Tags: Quarter, O'Connor & Associates
White papers 2007-04-20
Best Practices in Target Costing
This article is about the examined ways in which target costing has been applied in a variety of industries, the level of success and measurable improvements achieved, and the factors that influenced the success of these applications. The study began with a survey to collect information about target costing...
Tags: Accountant, Survey, Best Practice, Marketing Research, Marketing
White papers 2003-01-01
Activity Based Costing (ABC)
Activity Based Costing ABC is a costing methodology that views the entire organization as a collection of distinct activities. These activities form the basis of computing the costs. ABC refines costing systems by focusing on individual activities as the fundamental cost object. It assigns costs to cost objects based on...
Tags: Activity, Activity Based Costing, Managerial Accounting, Finance
Presentations 2004-02-16
Best practices in target costing
HERE IS HOW FOUR "MODEL" COMPANIES--THE BOEING COMPANY, CATERPILLAR, DAIMLERCHRYSLER, AND CONTINENTAL TEVES--APPLY THIS COSTING TECHNIQUE. The Consortium for Advanced Manufacturing--International (CAM-I), the American Institute of CPAs, and the University of Akron recently sponsored a major study to benchmark best practices in target costing. This study examined the ways...
Tags: Boeing Co., Caterpillar Inc., Continental, Daimler AG, Manufacturing, MARKETING, supplier, team
Research articles 2003-01-01
Loan guarantees to Israel - statement by State Department Spokesman Margaret Tutwiler - Transcript
We are pleased that Congress has agreed to delay consideration of the question of absorption loan guarantees for Israel. This step is a welcome affirmation of the President's judgment that a pause in considering absorption assistance is in the best interests of the historic opportunity for peace that lies...
Tags: Administration, Israel, SOFTWARE, U.S. Department of State
Research articles 1991-10-07
Right on the Money: Implementation of Target Costing
Companies that are feeling the profit pinch from competition are taking a hard look at target costing - designing a product to meet a specific cost objective. But achieving the magic number requires patience, commitment and a lot of effort. For companies that feel the profit pinch and believe target...
Tags: Penton Media Inc., Pinch
White papers 1999-10-01
Dallas/Ft. Worth Apartment Market Update
After a 2006 in which post-Katrina re-alignment created annual absorption totaling only 384 units, strong absorption figures in 2007 were an indicator of the strength gained in the multi-family market throughout Dallas/Fort Worth. Despite the strong absorption for the year, overall Dallas/Fort Worth occupancy stayed relatively stable with 0.18% increase...
Tags: Apartment, O'Connor & Associates
White papers 2008-01-25
Inhibition of Pancreatic Cholesterol Esterase Reduces Cholesterol Absorption in the Hamster
This paper reveals about the Pancreatic cholesterol esterase that has three proposed functions in the intestine which are to control the bioavailability of cholesterol from dietary cholesterol esters; to contribute to incorporation of cholesterol into mixed micelles; and to aid in transport of free cholesterol to the enterocyte. Inhibitors of...
Tags: Cholesterol
White papers 2004-04-19
Best Practices For Increasing Your Profits In A Down Economy
This webcast talks on “Best Practices for Increasing Your Profits in a Down Economy”. It tries to cover the issues like identifying the hidden profit opportunities with event-driven costing, implementing on profit initiatives, turning data into profits etc. The example of Owens and Minor Distributors are taken to identify the...
Tags: ABC Inc., Webcast, Penton Media Inc., Best Practice, Activity Based Cost Management, Roi/Tco, Balanced Scorecard, Finance, Managerial Accounting, Marketing, Marketing Research
Webcasts 2003-05-20
Costing in the service sector.(parallels between costing for services companies and firms in other sectors)
There are parallels between costing for service sector companies, and companies in other activities. Activity based costing can help accountants to simplify the process, and separate fixed from other costs. Products and services can be defined and compared with products and services from other companies. Allocations are necessary but are...
Tags: ABC Inc., allocation, marketing
Research articles 1996-05-01
Activity-Based Costing
Today, more and more organizations prefer Activity Based Costing ABC to traditional costing. ABC takes into account minute details regarding the activities and the factors that add up to the final cost. ABC is based on an activity hierarchy wherein the different activities influencing the cost build up are grouped...
Tags: Activity Based Costing, Managerial Accounting, Finance
Presentations 2003-01-01
Functional Role of P-Glycoprotein in Limiting Intestinal Absorption of Drugs: Contribution of Passive Permeability to P-Glycoprotein Mediated Efflux Transport
The aim of the present study is to evaluate the quantitative contribution of passive permeability to P-glycoprotein-mediated (P-gp-mediated) efflux and the functional activity of P-gp in determining intestinal absorption of drugs, and demonstrate the relationship between efflux parameters and intestinal permeability. MDRI-MDCKII cell monolayer permeability, human intestinal absorption HIA, and...
Tags: American Chemical Society
White papers 2004-11-23
San Antonio Apartment Market Continues Growth Streak
The San Antonio apartment market saw continued growth in occupancy and absorption this quarter. Absorption rates are the highest since the third quarter of 2005. Overall, the market absorbed an impressive 1,264 units this quarter, with most of that in the Classes A and B markets. The Class A market...
Tags: Apartment, Quarter, O'Connor & Associates, Absorption Rate
White papers 2007-08-02
Activity-based costing: something old, something new.
The accounting concept of activity-based costing incorporates both traditional and innovative techniques. This idea involves the study of activities that go as far back as 30 years to study cost upswings and downswings. Costs easily go up but they rarely if ever go down. New techniques that have been incorporated...
Tags: ABC Inc., accountant, accounting, allocation, FINANCE, PRODUCTIVITY, technique
Research articles 1994-12-01
advertisement
advertisement