Page 280 - BA2 Integrated Workbook STUDENT 2018

Fundamentals of Management Accounting

CHAPTER 4 – OVERHEAD ANALYSIS

4.1 XYZ absorbs overheads on the basis of machine hours. Details of budgeted and
actual figures are as follows:
Budget Actual

Overheads $1,250,000 $1,005,000
Machine hours 250,000 hours 220,000 hours

Calculate the value of the under/over absorption for the period.

Overheads were over/under absorbed by $___________.

4.2 What is cost apportionment?

A The charging of discrete identifiable items of cost to cost centres or cost
units.

B The collection of costs attributable to cost centres and cost units using the
costing methods, principles and techniques prescribed for a particular
business entity.

C The process of establishing the costs of cost centres or cost units.

D The division of costs amongst two or more cost centres in proportion to the
estimated benefit received, using a cost driver e.g. square metres.

4.3 A cost centre absorbs production overheads on the basis of machine hours. Last
period the overheads were under-absorbed by $20,000. The actual production
overhead incurred was $280,000 and 40,000 machine hours were worked.

The overhead absorption rate per machine hour was $ ________.

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