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i just want to know that why we absorb variable and fix overhead cost into direct labour hours? what is the reason behind this? and can we absorb it on per unit basis?
Can I suggest that you watch the lecture on the absorption of overheads, where I specifically deal with this point?
There are no rules in management accounting – you can absorb in whatever way you think is the most appropriate.
In the exam you are told which way to absorb – usually it is on about hours or on machine hours. If you watch the lecture then I explain the logic.
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