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MPX Resources uses absorption costing with a predetermined hourly fixed overhead absorption rate. For the year ended 31 December 2023, the following situations arose: 1. Actual overheads were less than the budgeted expenditure; and 2. Actual hours worked were less that the budgeted hours used to set the predetermine overhead absorption rate. Required: Which of the following statements is correct? OA. Both situations would cause the overheads to be over-absorbed. OB. Both situations would cause the overheads to be under-absorbed. OC. Situation 1 would cause the overheads to be under-absorbed and situation 2 would cause the overheads to be over- absorbed. OD. Situation 1 would cause the overheads to be over-absorbed and situation 2 would cause the overheads to be under- absorbed.

MPX Resources uses absorption costing with a predetermined hourly fixed overhead absorption rate. For the year ended 31 December 2023, the following situations arose: 1. Actual overheads were less than the budgeted expenditure; and 2. Actual hours worked were less that the budgeted hours used to set the predetermine overhead absorption rate. Required: Which of the following statements is correct? OA. Both situations would cause the overheads to be over-absorbed. OB. Both situations would cause the overheads to be under-absorbed. OC. Situation 1 would cause the overheads to be under-absorbed and situation 2 would cause the overheads to be over- absorbed. OD. Situation 1 would cause the overheads to be over-absorbed and situation 2 would cause the overheads to be under- absorbed.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter4: Activity-based Costing
Section: Chapter Questions
Problem 11E: Ripley, Inc., costs products using a normal costing system. The following data are available for...
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MPX Resources uses absorption costing with a predetermined hourly fixed overhead absorption rate. For the year ended 31 December 2023, the following situations arose: 1. Actual overheads were less than the budgeted expenditure; and 2. Actual hours worked were less that the budgeted hours used to set the predetermine overhead absorption rate. Required: Which of the following statements is correct? OA. Both situations would cause the overheads to be over-absorbed. OB. Both situations would cause the overheads to be under-absorbed. OC. Situation 1 would cause the overheads to be under-absorbed and situation 2 would cause the overheads to be over- absorbed. OD. Situation 1 would cause the overheads to be over-absorbed and situation 2 would cause the overheads to be under- absorbed.
Transcribed Image Text:MPX Resources uses absorption costing with a predetermined hourly fixed overhead absorption rate. For the year ended 31 December 2023, the following situations arose: 1. Actual overheads were less than the budgeted expenditure; and 2. Actual hours worked were less that the budgeted hours used to set the predetermine overhead absorption rate. Required: Which of the following statements is correct? OA. Both situations would cause the overheads to be over-absorbed. OB. Both situations would cause the overheads to be under-absorbed. OC. Situation 1 would cause the overheads to be under-absorbed and situation 2 would cause the overheads to be over- absorbed. OD. Situation 1 would cause the overheads to be over-absorbed and situation 2 would cause the overheads to be under- absorbed.
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