A Company Uses a Machine Hour Absorption Rate

Multiple Choice

A company uses a machine hour absorption rate.
During one month,the budgeted overheads are £24,000 and the budgeted machine hours are 6,400 hours.
The actual overheads incurred are £25,000.The actual machine hours operated were 6,250.
What is the total over/under absorption of overhead in the month,comparing the actual cost to the budget?

A) The overhead is UNDER absorbed by £1,000
B) The overhead is UNDER absorbed by £585.94 (to the nearest penny)
C) The overhead is UNDER absorbed by £1,562.50
D) The overhead is UNDER absorbed by £562.50