Intermediate: Calculation of overhead absorption rates and under/over-recovery of overheads BEC Limited operates an absorption costing system. Its budget for the year ended 31 December shows that it expects its production overhead expenditure to be as follows:

During the year it expects to make 200 000 units of its product. This is expected to take 80000 machine hours in the machining department and 120000 labour hours in the hand finishing depart¬ ment.
The costs and activity are expected to arise evenly throughout the year, and the budget has been used as the basis of calculating the company’s absorption rates.
During March the monthly profit statement reported (i) that the actual hours worked in each depart¬ ment were

Transcribed Image Text:

Fixed Variable Machining department 600 000 480 000 Hand finishing department 360 000 400 000