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Absorption of Overheads

Forums › FIA Forums › Absorption of Overheads

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by AvatarKen Garrett.
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  • August 3, 2021 at 5:28 am #630203
    Avatarmaximus07
    Participant
    • Topics: 446
    • Replies: 437
    • ☆☆☆☆

    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
    AvatarKen Garrett
    Keymaster
    • Topics: 10
    • Replies: 10657
    • ☆☆☆☆☆

    Denominator = budgeted output ie budgeted production.

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

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