Page 21 - PM Integrated Workbook 2018-19

A revision of Management Accounting (MA) topics

Traditional costing methods

2.1 Absorption costing

The aim of traditional absorption costing is to determine the full
production cost per unit.

TOTAL COST

Non -
Production
production
costs
costs

Direct (prime) costs Indirect costs Non-production costs

(production overheads)
 Materials  Selling and
 Factory rent distribution costs
 Labour (advertising,
 Supervisor’s salary delivery)

 Electricity  Administrative costs
(cleaners, postage)
 Depreciation

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