Question

in an engineering factory,thr dollowing particulars have been extracted for the quarter ended 31dec.2016.conpute the department overhead rate for each of the production department,assuming that overheads are recovered as a percentageof direct wages . particulars diect wages A30000 B4500

Answer 1

The amount absorbed in cost accounts may not be equal to actual overhead relating to an accounting period. The use of a predetermined rate may, therefore, result in under-absorption or over-absorption. When the amount absorbed is less than the actual overhead, there is under-absorption.