The cost accounts of ABC Chemicals Ltd., determined the overhead recovery rate for the year 2006
–07 (based on direct labor hours) with the following estimates.
Indirect labor Rs. 1,15,000
Inspection Rs. 70,000
Factory supervision Rs. 50,000
Depreciation and maintenance Rs. 1,25,000
Total Factory Overheads Rs. 3,60,000
Direct labor hours – 75,000
Hourly wages rate – Rs. 15
The actual results for the year are as follows
|
Particulars |
Amount in Rupees |
|
Indirect labor |
99,000 |
|
Inspection |
73,000 |
|
Factory supervision |
51,000 |
|
Depreciation and maintenance |
1,15,000 |
|
Total actual factory overheads |
3,38,000 |
|
Direct labor hours |
Hrs 67,600 |
|
Hourly wage rate |
Rs. 16 |
Calculate the predetermined overhead recovery rate and find out the amount of over/under absorptionif any.
How will you treat the over/under absorption amounts in Cost Accounts?