Dictionary definition: absorption rate

absorption rate ( overhead absorption rate ; recovery rate ) The rate or rates calculated in an absorption costing system in advance of an accounting period for the purpose of charging the overheads to the production of that period. Absorption rates are calculated for the accounting period in question using the following formula: budgeted overhead/budgeted production.
In absorption costing production may be expressed in a number of different ways; the way chosen to express production will determine the absorption rate to be used. The seven major methods of ...

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