Labour Absorption Rate Formula

Labour Absorption Rate Formula

Labour Hour Absorption Rate Formula =   Production Overhead            x 100                                                                    Budgeted Labour Hrs

Labour absorption rate is calculated by dividing the production overhead with budgeted labour hours.

Labour Absorption Rate Formula Example

Overheads Expenditure = $300,000

Budgeted Labour Hours = 20,000

Calculated Labour absorption rate?

Solution

= $ 300,000 (production overhead)/ 10,000 Total Labour Hours

= $ 300,000/ 20,000

= $ 15 (labour absorption Rate)