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Meaning of absorption cost pricing

 

 

 

Absorption cost pricing

 

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Business glossary

 

Meaning of term absorption cost pricing :

 

Absorption cost pricing is where a good is priced according to the proportion of direct and indirect costs used in the production of the good. The production of the good is costed using absorption costing and then priced accordingly. For example, the rent on a building may be split across the production of different goods by looking at the floor space used for the production of each good and split accordingly. Labour expenses may be split according to the number of people working on the production of each good.

 

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Absorption cost pricing

 

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Meaning of term absorption cost pricing

 

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