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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!
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.