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a company uses machine hour to absorb production overheads which were budgeted to be
E130500 for 9000 machine hours .actual overheads inccured were E128480 and 8800 machine hours were recorded
what was the total under absorption of production overheads?
Why are you setting me a test question?
Surely there is an answer in the same book in which you found the question? 🙂
The OAR is 130,500 / 9,000 = $14.50 per hour.
The overheads absorbed are therefore 8,800 x $14.50 = $127,600.
Therefore there is an under-absorption of $128,480 – $127,600 = $880
I do suggest that you watch our free lectures on this.
(Our free lectures are a complete course for Paper F2 and cover everything needed to pass the exam well.)