Under & over Absorption - Please HELP!!

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
I failed a question on under & over absorption on the Simulation! Is there something I don't know?? Under absorption is when the actual is higher than the estimate and over absorption is when the actual is lower than the estimate.

Is that it?

Please Help!!

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Under & over Absorption - Please HELP!!

    Yeah that's right :?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Under & over Absorption - Please HELP!!

    I wonder what I did wrong then?? :?:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Under & over Absorption - Please HELP!!

    I mark a number of skills test simulation papers and I reckon the biggest area of weakness lies in picking the right numbers.

    If I quote you, I can then be very pedantic.
    Under absorption is when the actual is higher than the estimate and over absorption is when the actual is lower than the estimate.

    I have highlighted the word estimate because it is imprecise.

    Such impression could mean you compare actual overhead incurred with the budgeted cost. This would be wrong.

    Look at the overhead absorbed
    take away
    the overhead incurred

    The difference is
      (if it is a -) the under-absorbed overhead
      (if it is a +) the over-absorbed overhead

    You should use overhead absorbed i.e. the budgeted total overhead divided by the budgeted labour hours (to find the overhead absorption rate) multiplied by the actual labour hours worked.

    sandy.hood@chichester.ac.uk

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