absorption
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Absorption
1. The total
demand for all goods and
services in an
economy. One calculates the absorption by adding the
value of all goods and services produced and consumed locally to that of all
imports.
2. A French term for
acquisition.
absorption
the sharing of indirect costs or OVERHEADS to units of product by means of COST RATES. Provided that actual overheads do not exceed BUDGET and that actual output is the same as budgeted output, then the overhead cost rate should allow total product cost to be determined, and a selling price set which will recover the overhead costs involved in producing and selling the product. See STANDARD COST, OVERHEAD COST VARIANCE.