Acompany uses an overhead absorption rate of $3.50 per machine hour, based on 32 000 budgeted machine hours for the period. During the same period the actual total overhead expenditure amounted to $108875 and 30000 machine hours were recorded on actual production.

11 By how much was the total overhead under or over absorbed for the period?

(a) Under absorbed by $3875

(b) Under absorbed by $7000

(c) Over absorbed by $3875

(d) Over absorbed by $7000 (2 marks)
ACCA F2 Management Accounting