A company absorbs overheads into products using a pre-determined overhead absorption rate based on labour hours. The following situation arose last month:

(i)Actual overhead expenditure was less than planned expenditure.

(ii)Actual labours hours was less than planned labour hours

Which of the following statements is correct?

a.Situation (i) would cause overheads to be over absorbed and situation (ii) would cause overheads to be under absorbed.

b.Situation (i) would cause overheads to be under absorbed and situation (ii) would cause overheads to be over absorbed

c.Both situations would cause overheads to be over absorbed

d.Both situations would cause overheads to be under absorbed