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How to calculate the amount of fixed manufacturing overhead that was under-recovered or over-recovered when the firm uses an absorption costing system and allocates fixed manufacturing overhead to work-in-progress based on machine hours?
Are there different methods in calculating under-recovery or over-recovery if a firm uses marginal costing system?
Over and under absorption is dealt with in Chapter 5 of our free lecture notes.
(There are no lectures on it as yet – they will be uploaded soon – but Chapters 5 and 6 are the same as for ACCA Paper F2 and there are lectures on them which explain it in detail).With regard to marginal costing, there is never a need to deal with over or under absorption. With marginal costing, it is always the actual fixed production overheads that are charged. They are not absorbed and so there is never any over or under absorption.
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