📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      A factory absorbs production overheads at a

      predetermined rate of ₹25 per machine hour. During the month, 8,000 machine hours were worked. The actual production overheads incurred amounted to ₹2,20,000. Which of the following correctly describes the overhead position?
      A Under-absorption of ₹20,000 Correct Answer Incorrect Answer
      B Under-absorption of ₹30,000 Correct Answer Incorrect Answer
      C Over-absorption of ₹20,000 Correct Answer Incorrect Answer
      D Over-absorption of ₹30,000 Correct Answer Incorrect Answer
      E No under/over-absorption Correct Answer Incorrect Answer

      Solution

      Absorbed overhead = 25 x 8000 = Rs.2,00,000 Actual overheads = Rs.2,20,000   Actual overhead > absorbed overheads. As such, there is under-absorption by Rs.20,000.   Note ·        If the overhead absorbed is less than actual, it's termed under-absorption ·        If the overhead absorbed is more than actual, it's termed over-absorption

      Practice Next
      More Financial Management Questions
      ask-question