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predetermined production overhead rates for the period used to absorbed are:
P1 $24.60 per machine hour
P2 $13.40 per direct labour hour
P3 $100.80 per direct labour hour
Machine hours and direct labour hours in each production cost centre are:
Cost centre Machine hours Direct labour hours
Budget Actual Budget Actual
P1 8100 8250 3650 3680
P2 1960 1880 8650 8440
P3 3610 3720 15600 15990Calculate for the period for each production cost centre:
a) The amount of overheads absorbed
b) The amount of any over or under absorption of overheadsIn future, please don’t just ask for the answer to a question you have found – say which part if causing you a problem 🙂
Since the know the absorption rate for each product, the total overhead absorbed for each product is the absorption rate multiplied by the relevant actual hours.
The over or under absorption is the difference between the total absorbed (as above) and the budgeted totals. The budgeted totals are the absorption rate multiplied by the relevant budgeted hours.
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