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under absorption

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › under absorption

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • May 12, 2016 at 4:49 am #314679
    alice98
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    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?

    May 12, 2016 at 6:41 am #314695
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51532
    • ☆☆☆☆☆

    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.)

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