Absorbed Cost

AAA

DEFINITION of 'Absorbed Cost'

The indirect costs that are associated with manufacturing. Absorbed costs include such expenses as insurance, or property taxes for the building in which the manufacturing process occurs. When the total manufacturing costs are determined, the implicit absorbed costs are not considered, but will be included in a separate account.

INVESTOPEDIA EXPLAINS 'Absorbed Cost'

On a company's income statement, the cost of goods sold entry does not reflect the absorbed costs; only the actual costs of the material is included. Incurring insurance and property tax expenses is a required part of the manufacturing process, but these absorbed costs are classified as separate expenses.

RELATED TERMS
  1. Explicit Cost

    A business expense that is easily identified and accounted for. ...
  2. Implicit Cost

    A cost that is represented by lost opportunity in the use of ...
  3. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  4. Job Hunting Expenses

    Costs that individuals may be allowed to deduct on their federal ...
  5. Opportunity Cost

    1. The cost of an alternative that must be forgone in order to ...
  6. Travel Expenses

    The costs associated with traveling for the purpose of conducting ...
Related Articles
  1. An Introduction To Depreciation
    Active Trading

    An Introduction To Depreciation

  2. Accounting Rules Could Roil The Markets
    Bonds & Fixed Income

    Accounting Rules Could Roil The Markets

  3. Playing The Sleuth In A Scandal Stock
    Investing Basics

    Playing The Sleuth In A Scandal Stock

  4. A New Approach To Equity Compensation ...
    Options & Futures

    A New Approach To Equity Compensation ...

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center