Absorption Rate

Business, Legal & Accounting Glossary

Definition: Absorption Rate

Absorption Rate

Quick Summary of Absorption Rate

The rate at which properties are able to be leased or sold in a given area.

What is the dictionary definition of Absorption Rate?

Dictionary Definition

The rate or rates that are calculated in an absorption costing system in advance of an accounting period of the purpose of charging the overheads to the production of that period.

Absorption rates are calculated for an accounting period using the following equation:

budgeted overhead / budgeted production.

Full Definition of Absorption Rate

In absorption costing, production may be expressed in a number of different ways; the way chosen to express production will ultimately determine the absorption rate to be used.

The seven main methods of measuring production, together with their associated absorption rates, are detailed below.

The absorption rate is used in the accounting period to obtain the absorbed overhead by multiplying the actual production achieved by the absorption rate.

These rates have been utilised by accountants for more than a century and are still widely applied. Some, however, would argue that these rates can’t provide the accuracy in terms of the cause and effects allocations of costs that modern managers require; in this instance, a system of activity-based costing ought to be used.

Examples of Absorption Rate in a sentence

Since the factory closed down and the town lost the bid to bring in another big company, the real estate absorption rate has been abysmal.

At our company, we track the absorption rate of commercial buildings. We create reports and sell that information to commercial real estate brokers and analysts.

The number of homes in an area that are for sale versus the actual number of home sales in that area over a given time period is the absorption rate for that area.


Synonyms For Absorption Rate

absorption coefficient
uptake rate

Related Phrases

market conditions

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
Modern Language Association (MLA):
Absorption Rate. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
March 31, 2023 https://payrollheaven.com/define/absorption-rate/.
Chicago Manual of Style (CMS):
Absorption Rate. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
https://payrollheaven.com/define/absorption-rate/ (accessed: March 31, 2023).
American Psychological Association (APA):
Absorption Rate. PayrollHeaven.com. Retrieved March 31, 2023
, from PayrollHeaven.com website: https://payrollheaven.com/define/absorption-rate/

Definition Sources

Definitions for Absorption Rate are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 11th August, 2022 | 0 Views.