Explain what is Cost allocation and Cost Absorption

December 5th, 2010 Comments off
Share |

Cost allocation:

  • Is the allotment of whole item of cost to a cost centre or a cost unit. It is the process of identifying, assigning or allowing cost to a cost centre or a cost unit


Cost absorption:

  • Is the process of absorbing all indirect costs or overhead costs allocated to or apportioned over particular cost centre or production department by the number of units produced

[Also  see another article on cost allocation versus cost apportionment]

Comments are closed now.

Financial Accounting


Advertise Here | Brain Teasers/Puzzles | Greeting Cards | Inspirational Quotes | Jokes/Humor | Useful Links | Motivational Stories | Resource | Shopping | Share/Express Your Views | Testimonials | Universities/Colleges | Words of Wisdom from Religions | FREE POSTING OF ACCOUNTING & FINANCE JOBS VACANCY|