Enter the direct labor costs ($), the material cost ($), the number of units produced, and the total variable and fixed manufacturing overhead ($) into the Absorption Cost Calculator. The calculator will evaluate and display the Absorption Cost.

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## Absorption Cost Formula

The following formula is used to calculate the Absorption Cost.

AC = (DL + MC + O) / U

- Where AC is the Absorption Cost ($/unit)
- DL is the direct labor costs ($)
- MC is the material cost ($)
- O is the total variable and fixed manufacturing overhead ($)
- #U is the number of units produced

To calculate an absorption cost, sum the direct cost, material cost, and overhead costs, then divide by the number of units produced.

## How to Calculate Absorption Cost?

The following example problems outline how to calculate Absorption Cost.

**Example Problem #1**

- First, determine the direct labor costs ($). The direct labor costs ($) is given as 134 .
- Next, determine the material cost ($). The material cost ($) is calculated as 900 .
- Next, determine the total variable and fixed manufacturing overhead ($). The total variable and fixed manufacturing overhead ($) is found to be 321.
- Next, determine the number of units produced. In this example, this is 100 units.
- Finally, calculate the Absorption Cost using the formula above:

AC = (DL + MC + O) / #U

Inserting the values from above yields:

AC = (134 + 900 + 321) / 100 = 13.55 ** **($/unit)