Product Absorption Rate Formula

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)