Page 20 - Cost Accounting - Ready Reckoner
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Treatment of over/ under absorption of OH’s can be by charging to costing P&L
A/c or by calculating supplementary rate and charged to various levels of output (WIP,
FG, etc)
If the under/ over absorption of OH’s is due to defective planning, it is charged to
Costing P&L A/c.
For Under Absorption For Over Absorption
Costing P&L A/c Dr. OH Control A/c Dr.
To OH Control A/c To Costing P&L A/c
Machine Hour Rate of Overheads:
The operating charges of machine are summed up and divided by machine hours
to find Machine Hour Rate.
If operator’s wages are included in cost, machine hour rate thus arrived is called
comprehensive machine hour rate.
