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absorption of fixed overheads
Costing
fixed overheads absorbed on the basis of normal production capacity. My question is ,How to absorb fixed overheads if a factory uses Machine hour rate or labour hour rate as absorption method? In my view they don't need to consider normal production or output capacity, as this is irrelevant, they'll have to absorb on the basis of effective machine hour rate or effective labor rate. Is this understanding correct?
Answers (3)
CA Suraj Lakhotia Admin
The machine hour would also be computed based on normal production
Sir, could you elaborate, please?
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