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If over-absorbed overheads,does the amount over-absorbed have to be deducted from the cost of production? And therefore, if under-absorbed overheads, does the amount under-absorbed have to be added to the cost of production?
Thank you.
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over absorption
should be deducted from cost of sales or added to unadjusted profit
under absorption
should be added to cost of sales or deducted from unadjusted profitmkalkwanza: Please do not answer in this forum – it is Ask the Tutor, and you are not the tutor (but please do help people in the general F5 forum) 🙂
pulet: mkalikwanza is correct. However questions on over and under absorption don’t get asked in Paper F5 – they are examined in Paper F2.
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