Question

The balance of Factory Overhead Control Account
represents
a.Under absorption of overheads
b.Over absorption of overheads
c.Either of the above
d.None of the above
​

Answer 1

Answer:

the balanced over head account

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Answer 2

b. Over absorption of overheads

Explanation:

Throughout the accounting period or a specified time, the overheads are absorbed based on a predetermined overhead absorption rate in accordance with the actual production of goods. The overhead rate is calculated using planned production and overheads. Three is the difference between the predetermined overhead rate and the actual overhead rate if budgeted overhead and output are different from actual overhead and output.

Over absorption occurs when the absorbed overheads are more than the actual overheads incurred.

Reasons for Over absorption of overheads:

1. The actual number of hours worked exceeds or falls short of the budgeted number.

2. Actual overhead expenses differ from those that were budgeted.

3. Actual overhead costs and activity levels deviate from planned costs and levels on both counts.

4. The overhead absorption technique can be incorrect.

5. The accounting period can include unforeseen costs.

6. Unusual costs may have been accounted for in the overhead absorption rate calculation.

7. Significant adjustments like the use of machines to replace manual labour. Increased capacity results from this.

8. Seasonal changes in the overhead costs from one period to the next.

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