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Hi there,
please excuse me if I am making a silly question, but: where could I find solutions to test questions at the end of every chapter? I have no clue about it.I cannot solve this question (question 6 chapter: marginal costing). Will be gratefull if someone could give me some insight.
The production overhead of department P is absorbed using a machine hour rate. Budgeted production overheads for the department were $280,000 and the actual machine hours were 70,000. Production overheads were under absorbed by $9,400.
If actual production overheads were $295,000 what was the overhead absorption rate per machine hour?
A $4.00
B $4.08
C $4.21
D $4.35thank you all
EAnswer for this is B
Whats given is budgeted overheads for department which is not really needed in this solution. What else is given to us. It says production overheads were under absorbed by 9400 and actual overheads are 295,000. So it means that with overhead absorption rate the overheads that were actually absorbed would be 295000-9400 =285600. And to get the overhead rate we can divide this 285600 by machine hours worked 70000 and we will get our absorption rateSo basically we are trying to get the actual overhead absorbed figure so that we can divide that by the actual number of hours to get the absorption rate
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