Question
In the context of cost accounting, overheads refer to
indirect costs that are allocated to cost units or cost centres. The process of absorbing overheads involves applying a predetermined overhead rate to allocate these costs. When the actual overheads are more than the absorbed overheads. It is called _______Solution
Under absorption occurs when the actual overhead costs are greater than the overhead costs that have been allocated or absorbed. This indicates that the overhead absorption rate was set too low, resulting in a shortfall that needs to be accounted for in the financial statements.
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