What’s Figured Into the Absorption Costing Method?
Virtually all costs and expenses associated with a finished manufactured product are figured into the determining the unit cost. The following is a list of categories that are used to determine the cost of a single unit of a finished product. • Direct Materials Cost is the actual cost of all materials that are used in the production of a finished product • Direct Labor Cost is the expense of the actual internal wages associated with the production of a finished product. • Variable Manufacturing Cost fluctuates with output. Examples may include equipment depreciation, utilities, outside labor, plant or equipment maintenance and material handling. • Variable Sales Costs are associated with the expense of sales. Salespersons commissions and advertising are examples of variable sales costs. • Fixed Manufacturing Overhead costs remain the same regardless of manufacturing output. Salaries paid to plant managers, rent on the facilities and insurance are some examples. • Fixed Selling Costs ar
