Over and under absorption of overheads
Overheads absorbed rarely match the actual cost. Work out the over or under absorption and see what it does to profit.
Task 1Absorbed is not the same as actual2 questions
During the year, overheads are absorbed at the budgeted rate for every hour actually worked. Overheads absorbed are the actual hours multiplied by the rate.
At the year end, the overheads absorbed are compared with the actual overheads.
- Over absorption
- absorbed is more than actual. Too much was charged to products
- Under absorption
- absorbed is less than actual. Too little was charged to products
Task 2The Cutting department's year3 questions
Task 3Assembly's year, and the effect on profit5 questions