Absorption of Overheads

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August 3, 2021 at 5:28 am #630203
maximus07
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Overhead absorption rate is taken in percentages of prime cost. So if I am given prime cost per unit. What will I do in denominator?
I mean that I will multiply prime cost per unit with budgeted sales units or with budgeted production units?
August 3, 2021 at 2:32 pm #630267
Ken Garrett
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Denominator = budgeted output ie budgeted production.

Production overheads are absorbed as units are made, not as they are sold.
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