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 ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center