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the cost accounts of abc chemicals ltd determined the overhead recovery rate for the 625799

The cost accounts of ABC Chemicals Ltd., determined the overhead recovery rate for the year 2006

–07 (based on direct labor hours) with the following estimates.

Indirect labor Rs. 1,15,000

Inspection Rs. 70,000

Factory supervision Rs. 50,000

Depreciation and maintenance Rs. 1,25,000

Total Factory Overheads Rs. 3,60,000

Direct labor hours – 75,000

Hourly wages rate – Rs. 15

The actual results for the year are as follows

Particulars

Amount in Rupees

Indirect labor

99,000

Inspection

73,000

Factory supervision

51,000

Depreciation and maintenance

1,15,000

Total actual factory overheads

3,38,000

Direct labor hours

Hrs 67,600

Hourly wage rate

Rs. 16

Calculate the predetermined overhead recovery rate and find out the amount of over/under absorptionif any.

How will you treat the over/under absorption amounts in Cost Accounts?

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