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Absorption Costing
A method of accounting in which all the costs associated with the production of a product are absorbed by that product. This includes direct costs like materials and labor, as well as fixed and variable overhead.
Variable Costing
An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.
Net Operating Income
The income generated from normal business operations, calculated by deducting operating expenses from gross income.
Absorption Costing
An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.
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