Mathematics · Cost Accounting
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: Debit (DR): Production overhead $4,000 Credit (CR): Profit or loss account $4,000 Which of the following statements is true?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Production overhead was over absorbed by $4,000
- 2Actual direct labour hours were 4,000 less than budgeted
- 3Actual direct labour hours were 800 more than budgeted
- 4Actual direct labour hours were 800 less than budgeted✓
Correct answer
Actual direct labour hours were 800 less than budgeted
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