Finance and Accounting-Costing Methods

Question 1

ABSORBING
If a company produces 2 items;
1-cost £500,000 and item 2-cost £300,000. Calculate the percentage it needs to contribute

Answer 1

500,000+300,000=800,000
500,000/800,000=0.625
0.625x100=62.5%
So it total costs=300,000
Item one needs to absorb 62.5% of that amount

Question 2

what does absorbing costs show?

Answer 2

how much of the total each item has to pay