Overheads

Estimate of overheads are always pre determined. There can be various ways of absorbing overheads. It can be on basis of OH Recovery rate per labour hour Or OH Recovery rate per machine hour Or OH Recovery rate per unit Or As a % of labour or prime cost. What we should not forget is this percentage based calculation is also just recovery. Actual overhead can be different and we will have under absorption or over absorption of overhead

pranay mehta

CA Inter

★ 50

23-Feb-22 21:35

This is fourth bit solution..plss explain me why should we take percentage on actual direct wages instead of budgeted direct wages

Thread Starter

Priyanka R

CA Final

★ 20K+

22-Feb-22 03:44

Overhead absorption rate is calculated by taking into consideration Budgeted Factory Overheads and Budgeted Direct wages. That fixed percentage must be applied on actual direct wages

Yoga Vishnu

CA Final

★ 11K+

22-Feb-22 12:48

Sir can you explain in detail

Thread Starter

Priyanka R

CA Final

★ 20K+

22-Feb-22 19:53

Overhead recovery rate is calculated based on budgeted amounts. And that rate shall be absorbed on actual basis only.

Yoga Vishnu

CA Final

★ 11K+

23-Feb-22 10:47

Thank you

Thread Starter

Priyanka R

CA Final

★ 20K+

23-Feb-22 21:38

Tq u sir

Thread Starter

Priyanka R

CA Final

★ 20K+

23-Feb-22 21:39