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I don’t know how 694,075 appears in answer.
A management consultancy recovers overheads on chargeable consulting hours. Budgeted overheads
were $615,000 and actual consulting hours were 32,150. Overheads were under-recovered by
$35,000.
If actual overheads were $694,075, what was the budgeted overhead absorption rate per hour?
A $19.13 B $20.50 C $21.59 D $22.68ANSWER
$
Actual overheads 694,075
Under-recoverable overheads 35,000
Overheads recovered for 32,150 hours at budgeted overhead absorption rate (x) 659,075
32,150 x = 659,075
x =
32,150
659,075
= $20.50The question says that the actual overheads were 694,075.
If they were under-recovered (under-absorbed) then it means that the total absorbed was 694,075 – 35,000 = 659,075.The amount absorbed is the actual hours worked x the absorption rate.
Therefore the absorption rate = 659,075 / 32,150 = $20.50 per hour.(You do not seem to have watched my free lectures – they are a complete course for Paper F2 and cover everything needed to be able to pass the exam well. I cannot type out all my lectures here 🙂 )
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