A company uses a blanket overhead absorption rate of $5 per direct labour hour.

Actual overhead expenditure in a period was as budgeted.

The under/over absorbed overhead account for the period has the following entries:

Which of the following statements is true?

(a) Actual direct labour hours were 800 less than budgeted.

(b) Actual direct labour hours were 800 more than budgeted.

(c) Actual direct labour hours were 4000 less than budgeted.

(d) Production overhead was over-absorbed by $4000.
(2 marks)
ACCA F2 Management Accounting

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DR ($) CR ($) Production overhead 4000 Profit or loss account 4000