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sir I am not getting the explanation behind the calculations bit lagging on it. can you please explain
question:A cost center has an overhead absorption rate of $4.25 per machine hour, based on a
the budgeted activity level of 12,400 machine hours.In the period covered by the budget, actual machine hours worked were 2% more than the
budgeted hours and the actual overhead expenditure incurred in the cost center was
$56,389.what was the total over or under absorption of overheads in the cost centre for the period
They actually worked 12,400 + 2% = 12,648 hours.
Therefore the amount of fixed overheads absorbed will have been 12,648 x $4.25 = $53,754.
The actual fixed overheads were $56,389, and therefore they have under-absorbed by 56,389 – 53,754 = $2,635.
Do watch my free lectures on this because I do work through very similar examples and explain the logic.
sir i got the answer it was just that in kaplan the solution was different
kaplan solution: Actual expenditure 56,389
Absorbed cost (12,400 × 1.02 × $4.25) 53,754
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Total under?absorption 2,635but now I got it both options were the same it’s just they worked it backwards and you explained different way both are correct
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