elements of labor, material, burden, overhead, and G&A costs accumulated on a time use of facility basis. The basic principles of level by level total absorption is that each activity or performance element in a manufacturing, warehousing, transportation, or merchandising operation involves the use of facilities and equipment, the use of materials and supplies, the expenditure of labor, and the use of money. By using work measurement techniques, the direct and variable cost elements of labor, material, and supplies can be defined, computed, and predicted for each operation with a reasonable degree of accuracy. Indirect and overhead charges can be assigned to the costs of operation in direct and equitable proportion to their time contribution to each function or activity by applying a time use of facilities approach and a workstation use rate.With this total absorption costing method is it possible to isolate cost of individual parts, item, and operations. One can quantify the impact of methods or product design and changes. The cost impact of capital facility and data control feedback improvements can be defined by comparing standard costs accumulated in the WIP inventory record and the actual costs accumulated. One can identify and promote higher margin products and services. DifferencesThe primary differences between the conventional method and how the use right applies indirect and period costs to the product is that the use rate applies the capital investment burden (depreciation), manufacturing burden and overhead, indirect costs, general and administrative expense to a stable predictable measurement unit (square feet and time) on a time sue of facilities, total absorption, standard costs basis. Burden and overhead costs are usually fixes (nearly stable) and have not normally fluctuated with production volume, labor or material costs. This method uses that portion of the plants manufacturing capacity and operating time, which is s...
