Accounting · Management Accounting
A company uses absorption costing with a predetermined hourly overhead absorption rate. The following situations arose last month: 1. Actual hours worked exceeded planned hours 2. Actual overhead expenditure exceeded planned expenditure What individual effect would each of these situations have on the absorption of overheads?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both would cause overheads to be under absorbed
- 2Both would cause overheads to be over absorbed
- 31 would cause under absorption and 2 would cause over absorption
- 41 would cause over absorption and 2 would cause under absorption✓
Correct answer
1 would cause over absorption and 2 would cause under absorption
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