Question

over-absorption of factory overheads, due to inefficiency of management, should be disposed of by:

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Answer 1

Answer:

when the under over absorbed overhead amount is significant , it should be disposed off by a ) Transferring to costing profit and loss account .

Answer 2

UNDER AND OVER ABSORPTION OF OVERHEAD

Over absorption of factory overheads, due to inefficiency of management, should be disposed of by transfer to costing profit and loss account.

GETTING TO KNOW MORE ABOUT UNDER AND OVER ABSORPTION OF OVERHEADS:

* When a corporation employs standard costing, it calculates the amount of overhead that should be incurred in a given accounting period and applies it to cost items. If the actual quantity of overhead differs from the expected amount, the overhead is said to be either under or over absorbed.

* If overhead is under-absorbed, it signifies that real overhead expenses exceeded expectations, and the difference was charged to expenditure as incurred.

* Overhead is overabsorbed when less real overhead expenses are incurred than predicted, resulting in more cost being applied to cost objects than was actually incurred. This indicates that the current period's expenditure recognition is lowered.