A company operates a standard absorption costing system and absorbs fixed production overheads based on machine hours.
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A company operates a standard absorption costing system and absorbs fixed production overheads based on machine hours. The budgeted fixed production overheads for the company for the previous year were £660,000 and budgeted output was 220,000 units using 44,000 machine hours. During that year, the total of the fixed production overheads debited to the Fixed Production Overhead Control Account was £590,000, and the actual output of 200,000 units used 38,000 machine hours.
Fixed production overheads for that year were:
A £90,000 under absorbed B £60,000 under absorbed C £20,000 under absorbed D £10,000 over absorbed
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