Absorption costing is a method of inventory costing in which all manufacturing costs, variable and fixed, are included as inventoriable costs. That is, inventory “absorbs” all manufacturing costs. The job costing system you studied in Chapter 4 is an example of absorption costing.
Under both variable costing and absorption costing, all variable manufacturing costs are inventoriable costs and all nonmanufacturing costs in the value chain (such as research and development and marketing), whether variable or fixed, are period costs and are recorded as expenses when they are incurred.