Question 1.
In a factory, overheads of a particular
department are recovered on the basis of ` 5 per
machine hour. The total expenses incurred and
the actual machine hours for the department for
the month of August were ` 80,000 and 10,000
hours respectively. Of the amount of ` 80,000, `
15,000 became payable due to an award of the
Labour Court and ` 5,000 was in respect of
expenses of the previous year booked in the
current month (August). Actual production was
40,000 units, of which 30,000 units were sold. On
analysing the reasons, it was found that 60% of
the under absorbed overhead was due to defective
planning and the rest was attributed to normal
cost increase. SHOW the treatment of
over/under-absorbed overhead in the cost
accounts?
In a factory, overheads of a particular
department are recovered on the basis of ` 5 per
machine hour. The total expenses incurred and
the actual machine hours for the department for
the month of August were ` 80,000 and 10,000
hours respectively. Of the amount of ` 80,000, `
15,000 became payable due to an award of the
Labour Court and ` 5,000 was in respect of
expenses of the previous year booked in the
current month (August). Actual production was
40,000 units, of which 30,000 units were sold. On
analysing the reasons, it was found that 60% of
the under absorbed overhead was due to defective
planning and the rest was attributed to normal
cost increase. SHOW the treatment of
over/under-absorbed overhead in the cost
accounts?
