Skip to content

CMA Intermediate · Cost Accounting · Cost Book-Keeping

In Mehta Tools' cost books, factory overhead actually incurred was Rs 2,45,000 and overhead absorbed in WIP was Rs 2,20,000. Selling and distribution overhead incurred was Rs 60,000 and absorbed in cost of sales Rs 65,000. The under or over absorption is written off to the Costing Profit and Loss Account. What is the net effect on it?

The Costing Profit and Loss Account bears a net debit of Rs 20,000. Factory overhead is under-absorbed by Rs 25,000, which is a charge, while selling overhead is over-absorbed by Rs 5,000, which is a credit. The two are netted, leaving Rs 20,000 as a debit.

  1. ANet debit of Rs 20,000Correct
  2. BNet credit of Rs 20,000
  3. CNet debit of Rs 30,000
  4. DNet debit of Rs 5,000

Explanation

Factory overhead under-absorbed = 2,45,000 - 2,20,000 = 25,000 (debit). Selling overhead over-absorbed = 65,000 - 60,000 = 5,000 (credit). Net = 25,000 - 5,000 = 20,000 debit.

Did you get it right without looking?

One question tells you little. A timed set on Cost Book-Keeping shows your real accuracy, how long you take and where you lose marks.

Practise Cost Book-KeepingFree diagnostic mock

More Cost Book-Keeping questions