In a factory, the overheads of a particular department are recovered on the basis of Rs. 5 per machine hour. The total expenses incurred and the actual machine hours for the department for the month of August were Rs. 80,000 and 10,000 hours, respectively. Of the amount of Rs. 80,000, Rs. 15,000 became payable due to an award of labour court and Rs. 5,000 was in respect of the expenses of the previous year booked in the current month (August). The actual production was 40,000 units, out of which 30,000 units were sold. On analysing thee reasons, it was found that 60% of the under-absorbed overhead was due to defective planning and the rest was attributed to the normal cost increase. How you treat the under-absorbed overheads in the cost accounts?
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