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CA Intermediate · Cost and Management Accounting · Job Costing

In a job costing system, if actual factory overhead is Rs 4,10,000 and overhead absorbed on jobs is Rs 3,80,000, what is the position and its usual treatment?

There is under-absorption of Rs 30,000 because actual overhead of Rs 4,10,000 exceeds the Rs 3,80,000 absorbed. Normal under-absorption is transferred to the costing profit and loss account rather than loaded onto jobs.

  1. AOver-absorption of Rs 30,000, credited to costing profit and loss account
  2. BUnder-absorption of Rs 30,000, transferred to costing profit and loss accountCorrect
  3. CUnder-absorption of Rs 30,000, credited to the jobs in progress
  4. DOver-absorption of Rs 30,000, charged to the jobs completed

Explanation

Actual overhead exceeds absorbed overhead by 4,10,000 - 3,80,000 = Rs 30,000, so overheads are under-absorbed. Normal under-absorption is written off to the costing profit and loss account.

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