accounting for overheads

But it seems that you have answered your own question :-) You have written that your answer is B because the debit side means that the overhead has been under-absorbed - it has indeed been under-absorbed. You then write that the only way to be under-absorbed is by the actual hours to be less than budgeted - that is true as well. However answer B says the opposite - it says that actual hours are more than budgeted. It is answer A that says that actual hours are less than budgeted :-)

It is easier for me to explain with a few numbers: Suppose they budget on overheads of $20,000 and they budget on working 10,000 hours. The absorption rate is therefore $2 per hour. Suppose they actually work only 8,000 hours. That means they will absorb 8,000 x $2 = $16,000. However fixed overheads will stay fixed at $20,000. But they will only have absorbed $16,000. So they will have under-absorbed by $4,000. It will help you to watch my free lectures on this. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.

You are welcome :-)