Calculate absorption cost per unit or solve for direct labor, material cost, overhead, or units produced from the other four values entered.

Enter manufacturing costs and output for the same production period. Amounts use US dollars.

Variable plus allocated fixed manufacturing overhead; exclude selling and administrative expenses.

Absorption Cost Formula

Choose the unknown under Solve for and enter the other four values for the same production period. The following formula estimates absorption cost, with manufacturing overhead already allocated appropriately. Amounts use US dollars; selling and administrative expenses are excluded. 

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

  1. First, determine the direct labor costs ($). The direct labor costs ($) is given as 134 .
  2. Next, determine the material cost ($). The material cost ($) is calculated as  900 .
  3. Next, determine the total variable and fixed manufacturing overhead ($). The total variable and fixed manufacturing overhead ($) is found to be 321.
  4. Next, determine the number of units produced. In this example, this is 100 units.
  5. 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)