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)