Overhead Absorption

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  • Topic: Cost, Costs, Absorption
  • Pages : 2 (397 words )
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  • Published : March 7, 2012
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1. A company uses a predetermined overhead recovery rate based on machine hours. Budgeted factory overhead for a year amounted to £720 000, but actual factory overhead incurred was £738 000. During the year, the company absorbed £714 000 of factory overhead on 119 000 actual machine hours.

What was the company's budgeted level of machine hours for the year?

A 116098 B 119000 C 120000

D 123 000

2. A company absorbs overheads on machine hours which were budgeted at 11 250 with overheads of £258 750. Actual results were 10 980 hours with overheads of £254 692. Overheads were:

A under-absorbed by £215 2
B over-absorbed by £4058
C under-absorbed by £4058
D over-absorbed by £215 2

3. The following data are to be used for sub-questions (i) and (ii) below:

Budgeted labour hours 8500
Budgeted overheads £148 750
Actual labour hours 7928
Actual overheads £146 200
(i) Based on the data given above, what is the labour hour overhead absorption rate? A £17.50 per hour
B £17.20 per hour
C £18.44 per hour
D £18.76 per hour

(ii) Based on the data given above, what is the amount of overhead under/over-absorbed? A £2550 under-absorbed
B £2529 over-absorbed
C £2550 over-absorbed
D £7460 under-absorbed

4. Canberra has established the following information regarding fixed overheads for the coming month: Budgeted information:
Fixed overheads £ 180 000
Labour hours 3 000
Machine hours 10 000
Units of production 5 000

Actual fixed costs for the last month were £160 000.
Canberra produces many different products using highly automated manufacturing processes and absorbs overheads on the most...
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