CA Inter P4 · Chapter 4 · Question 2 of 11
Budgeted factory overheads were ₹9,60,000 and budgeted direct labour hours 48,000. Actual overheads amounted to ₹9,90,000 and actual hours worked were 51,000. The overheads were:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Over-absorbed by ₹30,000
Explanation
Absorption rate = ₹9,60,000 / 48,000 = ₹20 per hour. Overheads absorbed = 51,000 x ₹20 = ₹10,20,000. Actual overheads = ₹9,90,000. Since absorbed exceeds actual, overheads are over-absorbed by ₹30,000.
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