Can someone plz clarify the menaing of following :
1) absorbtion of costs
2) cost recoved from Finshed goods
if possible then plz give me an example ..
thanks a lot in advance ...!!
CMA Shilpa Shinde
(COST ACCOUNTANT)
(217 Points)
Replied 15 March 2012
Dear Krina,
Your 2nd query is reply of 1st query.
To produce goods or to provide services, manufacture/ service provider needs Input (rawmaterial or input services) which obviously cost manufacfturer.
Now, while selling the finished goods produced using input purchased above, the cost of input is absorbed as cost of production i.e., from finished goods cost is recovered.
SHILPA
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