If pre-determined overhead is ₹4/hr and actual hours 5,000, absorbed overhead is:
A₹16,000
B₹25,000
C₹20,000
D₹18,000
Answer & Solution
Correct answer: C. ₹20,000
1. Absorbed overhead = pre-determined rate × actual activity (hours).
2. Substitute: ₹4 × 5,000 hours.
3. = ₹20,000.
4. This figure is then compared with the actual overhead to determine under or over absorption.
_Source: ICAI BoS Inter Paper 3, Ch 4 "Overheads", §4.5 Illus 2_
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