ECONOMICS

Detailed explanation-1: -The formula for absorption costing can be written as follows: Absorption cost = (Direct labor costs + Direct material costs + Variable manufacturing overhead costs + Fixed manufacturing overhead) / Number of units produced.

Detailed explanation-2: -So Formula for the total cost in absorption costing is given by: Total Cost = Total Direct Cost + Total Overhead Cost. Total Direct Cost = Direct Material Cost + Direct Labor. Total Overhead Cost = Variable Overheads + Fixed Overheads.

Detailed explanation-3: -Product costs under absorption costing include both manufacturing costs. Product costs under variable costing include only variable manufacturing costs. Absorption costing accounts for fixed manufacturing overhead as a product cost. Variable costing accounts for fixed manufacturing overhead as a period cost.

Detailed explanation-4: -Calculate the ABSORPTION. Subtract the total occupied space (Ob ) at the beginning of the period from the total occupied space (Oe ) at the end of the period. The result is the Net Absorption (A).