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I have question about under/over absorbed overhead by absorbed accounting method.
How under/over absorbed overhead will be treated to profit/loss acc?
If it is over absorbed overhead, it will need to increase profit, because the budgeted OH is higher than the actual OH. is it that right?
And
If it is under absorbed OH, It will need to lower profit, because the budgeted OH is lower than the actual OH. is that right?What does it mean by “Over(under) absorbed OH is a credit(debit) in profit/loss statement”?
I dont understand the underlying procedures of treating over/under absorbed OH in term of ledger entries recording.
Pls explain to me for the purpose of thoroughly understanding the subject. There are alot ways to treat OH in term of ledger recording, I have just wanted to know which ways ACCA need us to know.
Thanks alot.
Do read my reply to your latest F5 posting.
If you are determined to study over and under absorption, then this is covered in full in my free lectures on marginal and absorption costing (and I cannot type them all out here).
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