ECONOMICS

Detailed explanation-1: -There are four common methods of absorption of factory overheads: percentage of direct materials cost, percentage of direct labor cost, direct labor hour rate and machine hour rate.

Detailed explanation-2: -The absorption rate is calculated by dividing the factory overheads apportioned to a machine by the number of hours the machine has been worked. Thus, we will get the rate per machine how. This is called machine hour rate. In other words, it is the cost of running a machine for one hour.

Detailed explanation-3: -Absorption costing, sometimes called “full costing, ” is a managerial accounting method for capturing all costs associated with manufacturing a particular product. All direct and indirect costs, such as direct materials, direct labor, rent, and insurance, are accounted for when using this method.

Detailed explanation-4: -Absorbed cost is an accounting method that includes both the direct costs and indirect costs involved in manufacturing goods. Absorbed costs can include expenses like energy costs, equipment rental costs, insurance, leases, and property taxes.