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.

## 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

## 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)