Cost Accounting

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Ramachandran K (Querist)
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19 July 2010 Hi,

Can somebody explain the deferral of overhead in the case of Under/Over absorption with illustrations?

Also with some accounting journals.

Thanks & Kind Regards,

Ramachandran K

CA Punit

CA Punit (Expert)
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20 July 2010 under absorption costing Fixed costs are charged or accounted to products as per budgeted cost & production.
i.e. Budgeted Fixed Costs / Budgeted units

when the actual production is not equal to budgeted, the fixed cost charged to products is less or more than actually incurred. this difference is called under/over absorption.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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01 August 2010 Under absorpiton is the actual overhead is less than the pre determined rate of OHS

Over absorpiton is the actual overhead is more than the pre determined rate of OHS

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