| Absorption costing | A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs. Absorption costing is also referred to as the full cost method.
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| Fixed manufacturing overhead cost deferred in inventory | The portion of the fixed manufacturing overhead cost of a period that goes into inventory under the absorption costing method as a result of production exceeding sales.
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| Fixed manufacturing overhead cost released from inventory | The portion of the fixed manufacturing overhead cost of a prior period that becomes an expense of the current period under the absorption costing method as a result of sales exceeding production.
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| Variable costing | A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.
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