Excel Universit Colllege

Time allowed: 10 mins Total Marks: 10

1. A company uses an overhead absorption rate of $3.50 per machine hour, based on 32,000
budgeted machine hours for the period. During the same period the actual total overhead
expenditure amounted to $108,875 and 30,000 machine hours were recorded on actual
production.
By how much was the total overhead under or over absorbed for the period?
A Under absorbed by $3,875
B Under absorbed by $7,000
C Over absorbed by $3,875
D Over absorbed by $7,000
2. A company absorbs overheads on machine hours which were budgeted at 11,250 with overheads
of $258,750. Actual results were 10,980 hours with overheads of $254,692.
Overheads were
A under absorbed by $2,152
B over absorbed by $4,058
C under absorbed by $4,058
D over absorbed by $2,152
3. The production overhead of department P is absorbed using a machine hour rate. Budgeted
production overheads for the department were $280,000 and the actual machine hours were
70,000. Production overheads were under absorbed by $9,400.
If actual production overheads were $295,000 what was the overhead absorption rate
per machine hour?
A $4.00
B $4.08
C $4.21
D $4.35
4. A company made 17,500 units at a total cost of $16 each. Three quarters of the costs were variable
and one quarter fixed. 15,000 units were sold at $25 each. There were no opening inventories.
By how much will the profit calculated using absorption costing principles differ from
the profit if marginal costing principles had been used?
A The absorption costing profit would be $10,000 less
B The absorption costing profit would be $10,000 greater
C The absorption costing profit would be $30,000 greater
 Excel Universit Colllege
Time allowed: 10 mins Total Marks: 10
D The absorption costing profit would be $40,000 greater
5. Grove Limited reported an annual profit of $47,500 for the year ended 31 March 2000. The
company uses absorption costing. One product is manufactured, the Rover, which has the
following standard cost per unit.
Direct material (2 kg at $5/kg) 10
Direct labour (4 hours at $6.50/hour) 26
Variable overheads (4 hours at $1/hour) 4
Fixed overheads (4 hours at $3/hour) 12
52
The normal level of activity is 10,000 units although actual production was 11,500 units. Fixed
costs were as budgeted. Inventory levels at 1 April 1999 were 400 units and at the end of the year
were 600 units.
What were the budgeted fixed overheads for the year ended 31 March 2000 and the
actual under or over absorption?
Budgeted Overheads Under/over absorbed
A $120,000 $18,000 over absorbed
B $120,000 $18,000 under absorbed
C $138,000 $18,000 over absorbed
D $138,000 $18,000 under absorbed