Over Absorption in Cost Accounting Steps:

• Define over absorption: It occurs when overheads applied to production exceed actual overheads incurred, leading to a credit balance in the overhead account.
• Identify key comparison: Over absorption requires absorbed overheads > incurred overheads.
• Evaluate choices: Match each to the definition of absorbed vs. incurred or budgeted.
• Select matching option: Choose the one stating incurred < absorbed.

Why B is correct:

• Over absorption is defined as absorbed overheads exceeding incurred overheads (absorbed > incurred), per standard absorption costing formula: Under/Over absorption = Absorbed - Incurred.

Why the others are wrong:

• A: Describes under absorption relative to budget, not actual incurred.
• C: Indicates under absorption, where incurred > absorbed.
• D: Relates to favorable budget variance, not over absorption vs. actuals.

Final answer: B