under or over absorption

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi,
I thought I knew how to calculate how it is over or under absorbed, but after looking at the past papers im confused. which figure do you put first the actual overhead and then take away the overhead absorbed or the other way round to get the under or over absorbed. somebody please help.

Hopes this makes sense.
aly :(

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:under or over absorption

    It all depends which figure is the larger as all you're doing is finding the difference.

    If absorbed overheads > actual overheads then
    absorbed - actual = amount overabsorbed

    If absorbed overheads < actual overheads then
    actual - absorbed = amount underabsorbed

    I think that's right anyway :?

    Chris




  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:under or over absorption

    Hi,
    Just been looking in my folder it says that to fin the over or under absorption you take the overhead absorption away from the actual overheads. Is this right.
    aly
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:under or over absorption

    Hiya

    Yup my notes says:
    Actual Overheads - Absorbed Overhead

    Negative = Overabsorbed
    Positive = Underabsorbed
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:under or over absorption

    Hi thanks for that i think im just panicking now and looking too much into things.

    Thanks

    Aly
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:under or over absorption

    hi just thought this might help you, firstly think of how much money has been absorpted and it's say £500 and the actual overheads were £600. i'd think to myself i have an actual overhead of £600 and i've absorpted £500 is this enough? and its not so as you can see we still need another £100 so i've UNDER obsorbed or under paid because i've only accounted for £500 instead of £600. it's the same the other way round if you've absorpted £600 instead of actual £500 then you've overpaid ie over absorpted.
    hope this helps :wink:
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:under or over absorption

    Hi thats a great way of thinking. thanks for that. Are you worried about the exam? I am really terrified that when i get in the exam my mind will go blank. never mind not long to go.

    Aly

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