A company uses an overhead absorption rate of £6·50 per labour hour, based on 40,000 budgeted labour hours for the period. During the same period the actual total overhead expenditure amounted to £265,442 and 42,000 labour hours were recorded on actual production. By how much was the total overhead under or over absorbed for the period? a) Under absorbed by £7,558 b) Under absorbed by £5,442 c) Over absorbed by £7,558 d) Over absorbed by £5,442
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
A company uses an
By how much was the total overhead under or over absorbed for the period?
a) Under absorbed by £7,558 b) Under absorbed by £5,442 c) Over absorbed by £7,558 d) Over absorbed by £5,442
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