Past Paper Unit 6 Dec 03

Liliana

Hi All

I am trying to do the above paper and i have found propably a mistake and i wonder if anyone can help me to clarify.

On question 1.6 b & c of the above paper the answers are saying that the cutting department is underabsorbed and the finishing department is overabsorbed.
From my understanding and learning at college, the answer should be:

Cutting Department
Budgeted - 24000
Actual - 23125
Difference +875 (overabsorbed)

Finishing Department
Budgeted - 21150
Actual - 22050
Difference -900 (underabsorbed)

Anyone could help please?
Thanks
Liliana

Richard

The answer paper is correct - if you were budgeted to absorb 24,000 but you only absorbed 23,125 it is an underabsorption as you have not recovered enough overhead.

The opposite applies to the finishing dept - more has been absorbed than was budgeted for, therefore, overheads have been overabsorbed.