Product Absorption Rate Formula
Product Absorption Rate Formula = Production Overhead x 100 Budgeted Production (units) |
Product absorption rate is calculated by dividing production overhead with number of budgeted units.
Product Absorption Rate Formula Example
Overhead Expenditure = $ 400,000
Budgeted Production = 20,000
What would be product absorption rate?
Solution
Absorption Rate (Labour Hr) = Production overhead/Total units Produced
= $ 400,000 (production overhead)/ 20,000 Total Products
= $ 400,000/ 20,000
= $ 20 (product absorption Rate)
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