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CSS Financial and Cost Accounting P-1 QUESTION #6095
Question 1

Under what condition would factory overheads be considered 'over absorbed'?

  • The amount absorbed is less than the budgeted overheads.
  • The amount absorbed is greater than the budgeted overheads.
  • The actual overheads incurred are less than the amount absorbed.✔️
  • The actual overheads incurred are greater than the amount absorbed.
Correct Answer Explanation

Over absorption occurs when the overhead absorbed (Rate $\times$ Actual Activity) is higher than the actual overheads incurred.