Absorb
Financial Dictionary — Cost & Management Accounting
Definition
is to assimilate, transfer or incorporate amounts in an account or a group of accounts in a manner in which the first entity loses its identity and is "absorbed" within the second entity. For example, see ABSORPTION COSTING.
Use cases, Example & Why it matters
Use cases
- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.
Example
- Example: The costing team uses **Absorb** to allocate costs and analyze margins by product line.
Why it matters
- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.