Illustration 4 Using data from figure 50 assume that the production overhead

Illustration 4 using data from figure 50 assume that

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Illustration 4 Using data from figure 5.0 assume that the production overhead absorption rate was calculated where an activity of 200 machine hours was estimated. Prepare a summary showing any over or under absorption of overhead cost where the actual machine hours charged to jobs turns out to be a)150 hours b)250 hours
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a) Where actual activity is 150 hours Fixed Variable Total Shs. Shs. Shs. Overhead incurred 500 450 950 Variable overhead absorbed (450) (150 x 3) Fixed overhead absorbed (375) (150 x 2.50) Total Overhead absorbed (825) (150 x 5.50) ____ ____ ___ Under absorption of overhead 125 NIL 125 b) Where actual activity is 250 hours Fixed Shs. Variable Shs. Total Shs. Overhead incurred 500 750 1250 Variable overhead absorbed (750) (250 x 3) Fixed overhead absorbed (625) (250 x 2.50) Total Overhead absorbed (1375) (250 x 5.50) ___ ___ ___ Under absorption of overhead 125 NIL 125 c) Expenditure level and the absorption of production overhead cost A charge in expenditure on an overhead cost item may occur because of a charge in the price per unit and/or because of change in the number of units of the overhead commodity which are required Expenditure changes can affect the absorption of both fixed and variable overheads Illustration 5 AB Ltd has a machine cost center for which the following information is available
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