Factory overhead absorption rate of a pharmaceutical is Rs2.50. Budgeted Factory
ID: 2434097 • Letter: F
Question
Factory overhead absorption rate of a pharmaceutical is Rs2.50. Budgeted Factory overhead at two activity levels is asfollows for that period.
Activity level
Budgeted factory overhead
Low
20,000 Hours
Rs. 45,000
High
40,000 Hours
Rs. 75,000
Actual Factory overhead for that period was Rs. 42,000 andactual volume was 25,000 hours.
Required:
i. Variable factoryoverhead absorption rate
ii. Budgeted variable factoryoverhead at high activity level 40,000 hours.
Activity level
Budgeted factory overhead
Low
20,000 Hours
Rs. 45,000
High
40,000 Hours
Rs. 75,000
Explanation / Answer
ActivityLevel BudgetedOverhead 40,000 75,000 20,000 45,000 20,000 30,000 Variable Overhead = 30,000 / 20,000 = Rs. 1.5 / hour Budgeted variable factory overhead at acticity level of 40,000hours = Rs. 1.5 * 40,000 = Rs. 60,000 Fixed Overhead = Rs.75,000 - (Rs.40,000*1.5) = Rs. 15,000
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