Page 299 - BA2 Integrated Workbook STUDENT 2018

Answers to supplementary objective test questions

CHAPTER 4 – OVERHEAD ANALYSIS

4.1 Overheads for the period were over-absorbed by $95,000.

Overhead absorption rate = $1,250,000/250,000 = $5 per hour

$
Absorbed overhead = 220,000 hours × $5 1,100,000
Actual overhead incurred 1,005,000
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Over-absorbed overhead 95,000
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4.2 D

This is a straightforward definition question. Answer A is incorrect because it
describes cost allocation. Answers B and C describe cost allocation and
absorption as well as cost apportionment.

4.3 The overhead absorption rate per machine hour was $6.50.

$
Actual overhead incurred 280,000
Under-absorbed overhead 20,000
––––––––

Overhead absorbed 260,000
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Overhead absorption rate per machine hour = $260,000/40,000 = $6.50.

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