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Flashcards in Absorption Costing Deck (9):
1

Cost Unit

Products that absorb overheads as they pass through Cost Centres.

2

Cost Centre

Areas of the business that generate indirect costs. (Costs can’t be directly assigned to specific unit of production).

3

4 Stages of Absorption Costing

1) Allocate
2) Apportion (On some equitable basis)
3) Re-Apportion (Service to cost on some equitable basis)
4) Absorb (Overheard Absorption Rates)

4

Labour Intensive Cost Centre

Uses more labour than machines.

5

Capital Intensive Cost Centre

Uses more machines than labour.

6

Overhead Rates

Total Budgeted Overhead (£) / Hours

7

Allocation

When the amount of Overhead is assigned to the obvious Cost Centre.

8

Apportionment

The split of overheads between Cost centres are not obvious so they are apportioned on some equitable basis.

9

Absorption

The process of cost units absorbing overheads from production cost centres as they pass through them.