Overhead absorption rate

The overhead absorption rate provides a means of attributing overhead to a product or service, based, for example, on direct labour hours, direct labour cost or machine hours. Overhead absorption rates are required by the full cost method of pricing products and services. (See also marginal costing)

 

reference: Business Studies / Accounting. Accounts & Finance Glossary. Jim Riley BA(Hons) MBA FCA // tutor2u

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