Absorption Cost Calculator

Formula

The formula to calculate the Absorption Cost (AC) is:

\[ AC = \frac{DL + MC + O}{U} \]

Where:

$ DL $ is the direct labor costs ($).
$ MC $ is the material cost ($).
$ O $ is the total variable and fixed manufacturing overhead ($).
$ U $ is the number of units produced.

Example

Let's say the direct labor costs ($ DL $) are $5000, the material cost ($ MC $) is $3000, the total variable and fixed manufacturing overhead ($ O $) is $2000, and the number of units produced ($ U $) is 1000. Using the formula:

\[ AC = \frac{DL + MC + O}{U} = \frac{5000 + 3000 + 2000}{1000} = \frac{10000}{1000} = 10 \text{ dollars/unit} \]

So, the Absorption Cost ($ AC $) is $10 per unit.

What is Absorption Cost?

Absorption cost refers to the total cost assigned to each unit of production, including direct labor, material costs, and both variable and fixed manufacturing overhead. This method ensures that all manufacturing costs are accounted for in the cost of each unit produced, providing a comprehensive view of production expenses.

Extended information about "Absorption-Cost-Calculator"

Calculate Full Absorption Cost per Unit

Definition: Full absorption costing includes all direct costs and fixed and variable overhead costs associated with manufacturing a product.

Formula: $ \text{Absorption Cost per Unit} = \frac{\text{Total Direct Costs} + \text{Total Overhead Costs}}{\text{Total Units Produced}} $

Absorption Cost per Unit: The cost per unit including all costs
Total Direct Costs: The sum of all direct costs
Total Overhead Costs: The sum of all overhead costs
Total Units Produced: The total number of units produced

Example: $ \text{Absorption Cost per Unit} = \frac{50000 + 20000}{1000} $

Absorption Cost per Unit: The cost per unit including all costs
Total Direct Costs: $50,000
Total Overhead Costs: $20,000
Total Units Produced: 1000 units

Absorption Cost per Unit Formula

Definition: The absorption cost per unit is calculated by dividing the total costs by the number of units produced.

Formula: $ \text{Absorption Cost per Unit} = \frac{\text{Total Costs}}{\text{Total Units Produced}} $

Absorption Cost per Unit: The cost per unit including all costs
Total Costs: The sum of all costs
Total Units Produced: The total number of units produced

Example: $ \text{Absorption Cost per Unit} = \frac{70000}{1500} $

Absorption Cost per Unit: The cost per unit including all costs
Total Costs: $70,000
Total Units Produced: 1500 units

Full Absorption Cost Formula

Definition: Full absorption cost includes all direct and indirect costs associated with manufacturing a product.

Formula: $ \text{Full Absorption Cost} = \text{Direct Costs} + \text{Fixed Overhead} + \text{Variable Overhead} $

Full Absorption Cost: The total cost including all direct and indirect costs
Direct Costs: The sum of all direct costs
Fixed Overhead: The sum of all fixed overhead costs
Variable Overhead: The sum of all variable overhead costs

Example: $ \text{Full Absorption Cost} = 30000 + 15000 + 10000 $

Full Absorption Cost: The total cost including all direct and indirect costs
Direct Costs: $30,000
Fixed Overhead: $15,000
Variable Overhead: $10,000