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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 unitsThe 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.
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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 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.
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