A Level Accounting (9706)•9706/13/M/J/25

Explanation
Over-absorption in overhead costing Steps:
- Predetermined overhead rate = budgeted overheads ÷ budgeted production = 20 per unit.
- Absorbed overheads = actual overheads + over-absorption = 10,000 = $90,000.
- Actual units produced = absorbed overheads ÷ predetermined rate = 20 = 4,500 units. Why C is correct:
- In absorption costing, over-absorption is absorbed overheads minus actual overheads, so actual production = (actual overheads + over-absorption) ÷ (budgeted overheads ÷ budgeted production). Why the others are wrong:
- A. 3,500 units gives absorbed overheads of 10,000 under-absorption.
- B. 4,375 units gives absorbed overheads of 7,500 over-absorption.
- D. 5,825 units gives absorbed overheads of 36,500 over-absorption.
Final answer: C
Topic: Budgeting and budgetary control
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