Product Absorption Rate Formula
An absorption rate is
calculated on the bases of number of unit produced is known as Product
absorption rate or absorption rate based on Product. This absorption rate may
be calculated by dividing production overheads with total number of units
produced (units of different product).
Absorption Rate (Labour
Hr) = Production Overhead/Total Products
Product
Absorption Rate Formula Example
Total overhead expenditure
is $ 300,000 for two products (A, B). Total production of both products is
(50,000 units). Calculate Product Absorption Rate
Solution
Absorption Rate (Labour
Hr) = Production overhead/Total units Produced
=
$ 300,000 (production overhead)/ 50,000 Total Products
=
$ 300,000/ 50,000
=
$ 6 (product absorption Rate)
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