Accounting · Absorption Costing
A company uses absorption costing with a predetermined hourly fixed overhead rate. The following situations arose last year: (1) Actual overhead expenditure was less than the budgeted expenditure (2) Actual hours worked were less than the budgeted hours used to set the predetermined overhead absorption rate Would each of these situations cause overheads to be under-absorbed or over-absorbed?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1(1): Over-absorbed, (2): Under-absorbed✓
- 2(1): Over-absorbed, (2): Over-absorbed
- 3(1): Under-absorbed, (2): Under-absorbed
- 4(1): Under-absorbed, (2): Over-absorbed
Correct answer
(1): Over-absorbed, (2): Under-absorbed
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