Over-absorption in overhead costing Steps:

• Predetermined overhead rate = budgeted overheads ÷ budgeted production = $100,000 ÷ 5,000 units =$20 per unit.
• Absorbed overheads = actual overheads + over-absorption = $80,000 +$10,000 = $90,000.
• Actual units produced = absorbed overheads ÷ predetermined rate = $90,000 ÷$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 $70,000, resulting in$10,000 under-absorption.
• B. 4,375 units gives absorbed overheads of $87,500, resulting in$7,500 over-absorption.
• D. 5,825 units gives absorbed overheads of $116,500, resulting in$36,500 over-absorption.

Final answer: C