1) Budgeted Overhead Absorption Rate is calculated by a) budgeted overheads / budgeted hours b) budgeted overheads / actual hours c) actual overheads / actual hours d) actual overheads / budgeted hours 2) budgeted overheads £507,000, budgeted machine hours 253,500 hrs, actual overheads £510,500, actual machine hours 258,375 hrs. What is the OAR? a) £2 per machine hour b) £1.98 per machine hour c) £1.96 per machine hour d) £2.05 per machine hour 3) budgeted overheads £507,000, budgeted machine hours 253,500 hours, actual overheads £510,500, actual machine hours 258,375. What is the under / over absorption of overheads? a) £3,500 over absorbed b) £3,500 under absorbed c) £6,250 over absorbed d) £6,250 under absorbed 4) The amount of overheads absorbed into the cost of production is calculated by - a) OAR x budgeted machine or labour hours b) OAR x actual machine or labour hours 5) The budgeted overheads for the cutting department are £500,000. The department uses 50,000 machine hours and 25,000 labour hours. The budgeted OAR for the department will be - a) £10 per labour hour b) £10 per machine hour c) £20 per labour hour d) £20 per machine hour 6) If the budgeted overheads absorbed into production are more than actual overheads, there is an - a) over absorption of overheads b) under absorption of overheads 7) An under absorption of overheads will result in- a) an expense in the Income Statement b) an income in the Income Statement

Absorption Costing

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