Page 92 - BA2 Integrated Workbook STUDENT 2018
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Chapter 5
Absorption costing
The absorption cost of a product is the full cost of producing a unit
of the product. This will include the total of the variable costs,
including direct materials, direct labour, direct expenses and variable
overheads and fixed production overheads.
In the previous chapter we looked at how production overheads are absorbed into
each cost unit.
3.1 Absorption costing profit statement
Using the same example as above:
Absorption costing profit statement
ABC XYZ Total
$ $ $
Selling price 200 180
Direct materials 40 50
Direct labour 30 60
Variable overheads 10 15
Fixed overheads (W1) 30 60
–––––– ––––––
Profit per unit 90 (5)
× 400 × 250
–––––– ––––––
Total profit 36,000 (1,250) 34,750
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