CA Intermediate · Cost and Management Accounting · Overheads - Absorption Costing Method
A firm's budgeted factory overheads for the year are Rs 9,00,000 and budgeted direct labour cost is Rs 6,00,000. Job 21 uses direct labour cost of Rs 14,000. Overheads are absorbed on direct labour cost percentage. What overhead is charged to Job 21?
Rs 21,000 is charged. The predetermined rate is budgeted overheads divided by budgeted direct labour cost, which is 150%. Applying 150% to Job 21's direct labour cost of Rs 14,000 gives the absorbed overhead of Rs 21,000.
- ARs 21,000Correct
- BRs 14,000
- CRs 9,333
- DRs 15,000
Explanation
Rate = 9,00,000 / 6,00,000 x 100 = 150% of direct labour cost. Overhead = 150% x 14,000 = Rs 21,000. Rs 14,000 would result from wrongly using 100%.
Did you get it right without looking?
One question tells you little. A timed set on Overheads - Absorption Costing Method shows your real accuracy, how long you take and where you lose marks.
More Overheads - Absorption Costing Method questions
- Sundaram Fabrics absorbs factory overheads at a predetermined rate of Rs 15 per machine hour. During the year, actual machine hours were 40,…
- Kaveri Engineering Ltd. budgeted factory overheads of ₹6,00,000 for the year and 40,000 machine hours. Actual overheads were ₹6,30,000 and a…
- Mehta Industries had under-absorbed factory overhead of Rs 18,000 at year end. Overheads absorbed were Rs 2,70,000. Which statement is corre…
- Vindhya Engineering has two production departments, A and B, and two service departments, X and Y. Primary overheads: A Rs 1,50,000, B Rs 1,…
- Ganga Industries has two production departments, P and Q, and one service department, S. Overheads after primary distribution: P Rs 2,40,000…
- Which statement about the treatment of under-absorbed overheads caused by abnormal factors, such as a prolonged strike, is correct in cost a…