Final answer:
The absorption method allocates all fixed manufacturing overhead costs to the cost of a product, ensuring all units produced carry a share of these expenses and leading to a more accurate representation of production costs.
Step-by-step explanation:
The absorption method for defining Fixed Overhead (Fixed OVH) refers to the process of allocating all fixed manufacturing overhead costs to the cost of a product. In this method, the fixed costs of production, such as rent, salaries, and utilities, are spread across all units produced. This allocation can be important for pricing, inventory valuation, and financial reporting. By absorbing the fixed costs into the products, businesses ensure that each product bears a portion of these indirect expenses, which can provide a more accurate picture of the cost of production.