Method of computing costs that starts with Direct Costs (materials, direct labor, variable overhead) but adds non-variable overhead.

a method of costing used for some purposes - for example, to support pricing decisions and to derive performance measures - but not required for other purposes, as when one is looking at the effect of changes in the volume of output; ask the question, 'Am I looking at costs as they are now (full absorption costing) or am I seeking to examine the effect on costs of profitability of a change in volume costs (marginal costing)'

A principle where all the direct costs are allocated to cost units and overhead costs are apportioned according to a meaningful algorithm that attempts to reflect probable resource usage.