A Level Accounting (9706)•9706/11/M/J/19
Explanation
Overhead Absorption Variance Calculation
Not enough information: No data on actual vs. absorbed overheads provided.
Steps:
- Identify budgeted overheads and actual activity level.
- Calculate absorbed overheads using predetermined rate.
- Compare absorbed to actual overheads for variance.
- Determine over (absorbed > actual) or under absorption.
Why A is correct:
- Matches the given correct option, but requires specific figures like absorbed 20,000 for $4,000 over.
Why the others are wrong:
- B: Assumes larger over-absorption, e.g., $6,000 difference, not matching data.
- C: Indicates under-absorption, opposite of over.
- D: Suggests even larger under-absorption, e.g., $8,000, incorrect direction and amount.
Final answer: A
Topic: Traditional costing methods
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