Full absorption costing is the accounting approach required in the United States by Generally Accepted Accounting Principles (GAAP) in preparing public financial statements. Essentially, absorption costing is an accounting method that assigns all types of manufacturing costs (direct material, direct labor, fixed and variable overhead) to units produced. Absorption costing occurs as long as all costs related to production are allocated to (i.e., absorbed by) the units produced for inventory and eventual sale. Regardless of the specific accounting procedures employed, absorption costing generally takes places in both traditional unit-based costing systems and activity-based costing (ABC) systems.
See Activity-based cost management; Activity-based costing; Unit cost model.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Editor information
Rights and permissions
Copyright information
© 2000 Kluwer Academic Publishers
About this entry
Cite this entry
(2000). ABSORPTION COSTING MODEL . In: Swamidass, P.M. (eds) Encyclopedia of Production and Manufacturing Management. Springer, Boston, MA . https://doi.org/10.1007/1-4020-0612-8_6
Download citation
DOI: https://doi.org/10.1007/1-4020-0612-8_6
Publisher Name: Springer, Boston, MA
Print ISBN: 978-0-7923-8630-8
Online ISBN: 978-1-4020-0612-8
eBook Packages: Springer Book Archive