Abstract The article focuses on the research paper entitled "The Conceptual Foundations of Absorption Costing," appearing in the April 1972 issue of the journal The Accounting Review. The paper suggests that, fixed factors are fixed as to the available quantum of services but are divisible as to the use of these services. In other words, even though the fixed factors are indivisible as to acquisition, the flow of services they will render are divisible over their useful life. On the other hand, traditional economic theory treats fixed factors as being fixed as to time and not divisible as to use, thereby generating the familiar nonlinear total product and variable cost curves derived from the two factor production function. It is also stated that, if the fixed asset is used at an accelerated rate, then its value would be increased. Therefore, if a fixed factor is divisible as to use, its value is both a function of use and time. That portion which is a function of time should be treated as a period cost.
Gordon et al. (1973) studied this question.