CAF-5 · Chapter 2 · Question 8 of 10
A production department has budgeted factory overheads of Rs. 360,000 and expects to work 8,000 direct labour hours. What is the overhead absorption rate (OAR) per direct labour hour?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 45.00
Explanation
The Overhead Absorption Rate (OAR) is calculated as Budgeted Factory Overheads divided by Budgeted Base (Direct Labour Hours). Calculation: Rs. 360,000 / 8,000 hours = Rs. 45.00 per hour.
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