How it works
Absorption unit cost = direct material + direct labour + variable manufacturing overhead + allocated fixed manufacturing overhead per unit.
Input definitions
- Direct materials per unit
- Enter the value in the labeled unit.
- Direct labour per unit
- Enter the value in the labeled unit.
- Variable manufacturing overhead per unit
- Enter the value in the labeled unit.
- Period fixed manufacturing overhead
- Enter the value in the labeled unit.
- Production units for allocation
- Enter the value in the labeled unit.
A worked example
- Direct materials per unit
- 10
- Direct labour per unit
- 5
- Variable manufacturing overhead per unit
- 2
- Period fixed manufacturing overhead
- 3000
- Production units for allocation
- 1000
Assumptions & limits
Uses the accounting classifications, periods and policies you enter. Illustrative management-accounting model; it is not an audited statement, filing or determination of local accounting or tax compliance.
Sources & review
Maintained by AnsRio. Methods and examples use automated checks; this does not imply independent professional certification.
Method updated 2026-10-18. Content checked against the stated method and examples. Our verification approach.
Common questions
Does this include selling and administrative expenses?
No. It focuses on manufacturing inventory cost. Allocation capacity, abnormal waste and local accounting standards may change the treatment.
How does Absorption manufacturing unit cost work?
Absorption unit cost = direct material + direct labour + variable manufacturing overhead + allocated fixed manufacturing overhead per unit.
What should I check before using Absorption manufacturing unit cost?
Uses the accounting classifications, periods and policies you enter. Illustrative management-accounting model; it is not an audited statement, filing or determination of local accounting or tax compliance.