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    Question

    Factory overheads are absorbed at 20% of direct wages.

    Direct wages = ₹1,00,000, actual overheads = ₹22,000. What is the overhead variance?
    A ₹2,000 over-absorbed Correct Answer Incorrect Answer
    B ₹2,000 under-absorbed Correct Answer Incorrect Answer
    C Nil Correct Answer Incorrect Answer
    D ₹20,000 over-absorbed Correct Answer Incorrect Answer
    E ₹22,000 under-absorbed Correct Answer Incorrect Answer

    Solution

    Absorbed = 20% of 1,00,000 = 20,000. Actual = 22,000. Difference = under-absorbed 2,000.

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