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Home > QFINANCE Dictionary > Definition of absorption costing

Definition of

absorption costing


method allocating overhead costs to product an accounting practice in which fixed and variable costs of production are absorbed by different cost centers. Providing all the products or services can be sold at a price that covers the allocated costs, this method ensures that both fixed and variable costs are recovered in full. However, if sales are lost because the resultant price is too high, the organization may lose revenue that would have contributed to its overhead.

Related definitions of "absorption costing"

Definitions of ’absorption costing’ and meaning of ’absorption costing’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’absorption costing’ and other financial terms with our online QFINANCE Financial Dictionary.

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