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- This topic has 5 replies, 4 voices, and was last updated 3 years ago by John Moffat.
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- February 24, 2016 at 10:51 am #301811
A company has over-absorbed fixed production overheads for the period by $6,000. The fixed production overhead absorption rate was $8 per unit and is based on the normal level of activity of 5,000 units. Actual production was 4,500 units.
What was the actual fixed production overheads incurred for the period?
A $30,000
B $36,000
C $40,000
D $42,000
I have a doubt why the fixed production overhead absorption rate still was $8 per unit when the Actual production was 4,500 unitsFebruary 24, 2016 at 11:42 am #301826The absorption rate is always calculates on the budgeted figures and is not changed.
Each unit actually produced is charged at this standard absorption rate. Since the total absorbed as a result is likely to be different from the actual total, the difference is the under or over absorption.
I do suggest that you watch our free lectures on absorption and marginal costing.
Our lectures are a complete course for Paper F2 and cover everything needed to be able to pass the exam well.
March 8, 2021 at 7:35 pm #613992hi, so what is the answer?
March 9, 2021 at 8:11 am #614020You tell me the answer and I will tell you whether or not you are correct!! 🙂
March 11, 2021 at 4:24 pm #614198company has over-absorbed fixed production overheads for the period by $6,000. The fixed production overhead absorption rate was $8 per unit and is based on the normal level of activity of 5,000 units. Actual production was 4,500 units.
What was the actual fixed production overheads incurred for the period?
A $30,000
B $36,000
C $40,000
D $42,000
I have a doubt why the fixed production overhead absorption rate still was $8 per unit when the Actual production was 4,500 units.this question has been asked in the ask the tutor forum for some years ago. I thought it might be a good idea if I have a go at it. please advise if I got it right.
calculation.
5000*8 equals 40000
actual level of activity 4500* 8 OAR equals 36000 less the over absorbed amount of 6000 equals 30000. Thank you very much for your assistance.
March 11, 2021 at 5:11 pm #614204Yes – that is correct 🙂
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