Absorption of overheads is the process by which the total cost of a production centre is charged to the cost units within that centre. Absorption of overheads is charged to cost units based on an absorption rate and this is calculated at the beginning of the period based on budgeted activity and budgeted overheads. There … Read More

Costs can be classified in 4 ways – by function, by element, by nature and by behaviour. Classification of costs by function: Production costs- this is also known as “cost of sales”. This category would include production labour costs, materials, factory supervisor salaries, factory rent. These are any costs which are directly linked with organisations … Read More