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Question about Accounting for overheads: Production Overhead Control Account

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Question about Accounting for overheads: Production Overhead Control Account

  • This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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    Posts
  • October 4, 2017 at 1:20 pm #409430
    ei8ht
    Member
    • Topics: 8
    • Replies: 3
    • ☆

    This might be a silly question but I’m unsure of how the production overhead control account works.

    Production Overhead Control Account
    On the debit side :
    Stores control : $22,800
    Wages control: $180,400
    Expense creditors: $210,000

    On the credit side:
    Work in progress: $404,800
    Profit or loss: $8400

    Which of the following statements are correct:
    a) indirect materials issued from inventory was $22,800
    b) overheads absorbed during the period was $210,000
    c) overheads for the period was over absorbed by $8400
    d) indirect wages costs incurred were $180, 400

    Could you explain the Production Overhead Control Account for me a bit, please? I don’t think this was included in the lecture or the notes and I’m having some trouble understanding the question.

    Thank you, sir!

    October 4, 2017 at 1:36 pm #409433
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54665
    • ☆☆☆☆☆

    Questions about the t-accounts are very uncommon, which is why they are not covered in the lectures.

    We debit the overhead control account with all of the actual amounts spent on overheads (so indirect wages, indirect stores, and indirect expenses).
    We then credit the overheads control account with the overheads to be absorbed at the standard overhead absorption rate.

    The balance left (the difference between the actual total overheads and the overheads absorbed) is the over or under absorption of overheads, and this will appear in the profit statement.

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