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What is Absorption? What are the various methods used for deciding the rates of overhead absorption?
Absorption is the method where each job or product gets the loading of the overheads while it is moving through the production department. It is also known as recovery of overheads.
Following are the various methods used for deciding the rates of overhead absorption:
- Direct material cost percentage rate
- Direct wage percentage rate
- Prime cost percentage rate
- Labour hour rate
- Machine hour rate
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