mMCQ.

Navigation Menu

Step into mMCQ.

Launch mMCQ. diagnostic

Explore mMCQ.

MDCAT prepFree DiagnosticPricing & SubscribeSign in

Resources

Terms & Conditions

mMCQ.

© 2021 - 2025 mMCQ.All rights reserved.

WhatsApp
A Level Accounting (9706)•9706/13/M/J/20
Question 25 from 9706/13/M/J/20

Explanation

Overhead absorption variance

Steps:

  • Absorption rate = budgeted overheads ÷ budgeted hours = 25,000÷15,000=25,000 ÷ 15,000 = 25,000÷15,000=5/3 per hour.
  • Absorbed overheads = rate × actual hours = (5/3)×16,000=5/3) × 16,000 = 5/3)×16,000=26,667.
  • Over/under absorption = absorbed overheads - actual overheads = 26,667−26,667 - 26,667−25,000 = $1,667 over absorbed.

Why C is correct:

  • Statement C is incorrect because the over absorption is 1,667(fromvolumevarianceformula:rate×(actualhours−budgetedhours)),not1,667 (from volume variance formula: rate × (actual hours - budgeted hours)), not 1,667(fromvolumevarianceformula:rate×(actualhours−budgetedhours)),not500.

Why the others are wrong:

  • A: Over absorption is 1,667,not1,667, not 1,667,not4,500.
  • B: Overhead absorption is over (actual hours > budgeted hours), not under.
  • D: Overhead absorption is over (actual hours > budgeted hours), not under.

Final answer: C

Topic: Traditional costing methods

Practice more A Level Accounting (9706) questions on mMCQ.me