Define: Absorption Costing

UK Accounting Glossary

Definition: Absorption Costing


Quick Summary of Absorption Costing


A method of calculating the cost of a product or enterprise by taking into account indirect expenses (overheads) as well as direct costs.



What is the dictionary definition of Absorption Costing?

Dictionary Definition


This is the cost accounting system in which the overheads of an organisation are charged to the production by means of the absorption process.

Costs are first apportioned to cost centres, where they are absorbed using absorption rates.

Although this method is simple; it invokes an essentially arbitrary allocation of costs; as such the activity-based costing system of accounting is now widely preferred.


Full Definition of Absorption Costing





Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/absorption-costing/
Modern Language Association (MLA):
Absorption Costing. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. July 21, 2019 https://payrollheaven.com/define/absorption-costing/.
Chicago Manual of Style (CMS):
Absorption Costing. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/absorption-costing/ (accessed: July 21, 2019).
American Psychological Association (APA):
Absorption Costing. PayrollHeaven.com. Retrieved July 21, 2019, from PayrollHeaven.com website: https://payrollheaven.com/define/absorption-costing/

Definition Sources


Definitions for Absorption Costing are sourced/syndicated from:

  • Oxford Dictionary Of Economics
  • BusinessDictionary.com
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 27th January 2019.