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sir the formula for oar is budgeted production overhead/budgeted total of absorption basis what if the exact figure is not give and for example there’s a question like this:
budgeted overheads: $197200
actual overheads: $195618
under-absorbed overheads $7292
actual labour hours: 7640how do we get th OAR?
The overheads absorbed will be the actual overheads less the under-absorption, so 188,326 (195618 – 7292).
They are absorbed by multiplying the actual hours by the absorption rate. You know the amount absorbed, and you know the actual hours, so now you can calculate the absorption rate 🙂
ahh I got it, sorry sir I was confused about either deducting it from the budgeted overhead or actual overhead.. 195618-7292= 188326. OAR is 188326/7640= $24.65. Thankyou so much sir 😀
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