Tag: Overhead recovery

The following figures are given for a Alex Manufacturing Ltd’s factory’s overheads and machine hours worked.

   machine hours  total overhead costs  overhead absorption rate

• budgeted   122,000 hrs   £268,400   £2.20 
• actual    116,000hrs   £261,000   £2.25

What was the under- or over-absorption of overhead for the quarter?

Select ONE answer:

1. £5,800 over-absorbed
2. £5,800 under-absorbed
3. £7,400 over-absorbed
4. £7,400 under-absorbed

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – (6,000 hrs * £2.2) – (£268,400 – £261,000)
3. Not correct
4. Not correct

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