Sankalp Industries absorbs factory overhead costs at Rs. 2.50 per direct labour hour. Both opening and closing balances of WIP and fi nished goods inventories are zero.

Following are the data available for a year and the fact is that all goods produced have been sold.

Assuming that all goods produced have been sold:

(a) calculate the factory overheads incurred and factory overheads absorbed: and

(b) pass a journal entry for disposing of over- or underabsorbed factory overheads.

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Direct labour hours used Direct labour cost Indirect labour cost 50,000 Rs. 1,00,000 Rs. 25,000 Indirect materials cost Depreciation of Rs. 10,000 Rs. 50,000 plant & equipment Miscellaneous factory overheads Rs. 50,000