PRC-1 · Chapter 7 · Question 14 of 100
Which of the following correctly describes 'over-absorption' of production overheads?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Absorbed overheads > Actual overheads
Explanation
Over-absorption occurs when the overheads applied (absorbed) to inventory units based on the predetermined rate exceed the overheads actually incurred during the period.
More IAS 2: Inventories MCQs
- Q16Which of the following expenditures should be included in the capitalized cost of inventory?
- Q17Which of the following scenarios describes a situation where a perpetual inventory system would be MOST suitable?
- Q18An entity uses a perpetual inventory system. Which TWO journal entries are simultaneously required to record a sale of goods on credit?
- Q19According to IAS 2, how should unallocated fixed production overheads be treated when actual production is abnormally low?
- Q20Which of the following items is EXCLUDED from the scope of IAS 2 Inventories?