Overhead recovery rate ..

topcat

Hello,

"the budget production of 15,000 units of A plus 5000 units of B will require 4000 machine hours and 1050 direct labour hours"

Over head recovery should be based on:

-units of output
-Labour Hours
-Machine hours

The answer is machine hours

Just wondering why not units as there is more of them ?

Jules18

I am speculating it is because the AATgenerally examine based on the two commonly-used measures which are total numbers of direct labour hours and total numbers of machine hours for absorption rate calculations.

topcat

Jules18 wrote: »

I am speculating it is because the AATgenerally examine based on the two commonly-used measures which are total numbers of direct labour hours and total numbers of machine hours for absorption rate calculations.

Thanks Jules ! :-)