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Good day to all,
I just want to know, is the calculation of finding the overhead cost of blanket absorption the same as normal absorption costing method? If not, kindly please point out the difference.
Thanks, in advance.
Blanket overhead cost means that the same absorption rate will apply to all the different units or sections of an organization. Maybe i will clear it with an example. lets say there is a production company for cars that has an assembly and a finishing section. So when we talk about blanket absorption rate it will mean that the same OAR will apply to the whole factory (assembly and finishing) and when we say that normal absorption method is used it will mean that each assembly and finishing will have their own absorption rate based on total hours worked in each one of them
So blanket= total hours for whole factory normal= total hours for each section hence diff OAR for each section
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