Flashcards in Absorption Costing Deck (9):
Products that absorb overheads as they pass through Cost Centres.
Areas of the business that generate indirect costs. (Costs can’t be directly assigned to specific unit of production).
4 Stages of Absorption Costing
2) Apportion (On some equitable basis)
3) Re-Apportion (Service to cost on some equitable basis)
4) Absorb (Overheard Absorption Rates)
Labour Intensive Cost Centre
Uses more labour than machines.
Capital Intensive Cost Centre
Uses more machines than labour.
Total Budgeted Overhead (£) / Hours
When the amount of Overhead is assigned to the obvious Cost Centre.
The split of overheads between Cost centres are not obvious so they are apportioned on some equitable basis.