Gce Model Questions Vol1 2021 Financial Accounting Question 6
Practice objective / multiple choice question 6 from the 2021 Gce Model Questions Vol1 Financial Accounting examination.
Company X uses absorption costing. At the start of the year the overhead absorption rate was \(£5\) per machine hour. During the first two months \(2{,}000\) machine hours were used. From March onward the rate was revised to \(£6\) per machine hour and a further \(1{,}500\) machine hours were used. Direct material cost per unit is \(£12\) and direct labour cost per unit is \(£8\). The company produced \(5{,}000\) units, of which \(4{,}200\) were sold. The actual overhead incurred for the year was \(£31{,}500\). Calculate (a) the closing inventory valuation under absorption costing and (b) the amount of under‑ or over‑applied overhead to be transferred to profit or loss.
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About This Question
This is Gce Model Questions Vol1 2021 Financial Accounting Question 6. It is one of the objective questions from the 2021 Gce Model Questions Vol1 Financial Accounting examination.
Difficulty level: Hard .
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