unabsorbed cost

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The part of the overhead costs of a production process that are not covered by its revenue when the output falls below a specified level. Overheads are sometimes added to the direct costs of a process and divided by the output to give a unit cost. The output for this calculation is often set at such a level that the whole of the overheads are absorbed by the unit cost. If, in fact, the output falls below this level, the whole of the overheads will not be absorbed, the deficit being the unabsorbed cost.

Subjects: Business and Management.

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