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OAR

Forums › ACCA Forums › ACCA MA Management Accounting Forums › OAR

  • This topic has 3 replies, 2 voices, and was last updated 7 years ago by Tod.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 28, 2015 at 10:44 am #285883
    Tod
    Member
    • Topics: 9
    • Replies: 11
    • ☆

    an organisation absorb overheads based on units produced .in april 220 000 units were produced and actual overheads were $1000000.overheads were $100000 over absorbed in The month

    What was the oar per unit ?

    Don’t have any answer choices

    Thanks

    November 28, 2015 at 7:23 pm #286009
    HazE
    Participant
    • Topics: 11
    • Replies: 84
    • ☆☆

    Ok. So OAR is always calculated as budgeted overheads divided by budgeted units produced.
    In this question they already told us that OAR is based on 220 000 units and we just have to work out the budgeted overhead.as the actual overhead is given already. Its pretty simple. It says the actual overheads were 1.000.000 and were over absorbed by 100.000.
    Lets think about it for a second. If it is over absorbed that means that the actual overhead incurred is less then budgeted.So if 1,000,000 is actual and we add 100.000 to it we will get the budgeted overheads. Once we have budgeted overheads we will divide it by 220.000 and get the OAR. So.
    1,000,000 + 100,000 =1,100,000/220,000= 5 per unit

    you can check it or you can think about it this way for the purpose of understanding that you multiply 5 which is OAR with number of units to see how much of it is absorbed and in this case you multiply with 220000 and will get 1,100,000. which is clearly 100,000 more then the actual 1,000,000

    November 29, 2015 at 9:47 am #286090
    Tod
    Member
    • Topics: 9
    • Replies: 11
    • ☆

    The best explanation! Thank you very much ! 🙂

    November 29, 2015 at 9:48 am #286091
    Tod
    Member
    • Topics: 9
    • Replies: 11
    • ☆

    Tge best explanation! Thank you very much ! 🙂

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