ACCA MA · Chapter 6 · Question 9 of 11
At the end of a period, production overheads have been under-absorbed. How is the under-absorption accounted for?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It is debited to the statement of profit or loss as an extra expense
Explanation
Under-absorption means too little overhead has been charged to production, so the shortfall is written off as an extra charge (a debit) in the statement of profit or loss for the period. Over-absorption would be credited, increasing profit.
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