Budgeted fixed overhead ₹1,80,000; budgeted activity 60,000 hours. Actual hours 50,000; actual fixed overhead ₹1,70,000. Under-absorbed amount:
A₹10,000
B₹20,000
C₹15,000
D₹25,000
Answer & Solution
Correct answer: B. ₹20,000
1. Pre-determined rate = 1,80,000 / 60,000 = ₹3 per hour.
2. Absorbed fixed overhead = ₹3 × 50,000 actual hours = ₹1,50,000.
3. Actual fixed overhead = ₹1,70,000.
4. Under-absorption = actual − absorbed = 1,70,000 − 1,50,000 = ₹20,000.
_Source: ICAI BoS Inter Paper 3, Ch 4 "Overheads", §4.6.1 Illus 8_
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