the budget of direct labour hour rates of overhead absorption for fixed and variable 618409

Model: Over- or Under-absorption

The budgeted activity and cost data for each half year of XY Ltd were as follows:

During the first six months, the following actual results were achieved:

The existing method of absorbing overhead is by a direct-wage percentage rate. A proposal has been made to change the overhead absorption to a direct labour-hour rate analysed into fixed and variable overhead.

You are required to calculate under the new proposal (i.e., using direct labour-hour rates of absorption) for the first six months period:

1. The budget of direct labour-hour rates of overhead absorption for fixed and variable overheads.
2. The absorbed overhead.
3. The over- or under-absorbed overhead.