under absorption,overabosrption -overhead,disposal overhead
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What are three possible ways to dispose of underallocated or overallocated overhead costs at the end of a fiscal year? Briefly comment on the theoretical correctness or incorrectness of each method.
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Solution Summary
The solution describes overhead allocation,under absorption and over absorption of overhead, methods of disposal of overhead.
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Overheads are allocated to the products manufactured on the basis of some predetermined rate. Predetermined date is found out by dividing the total estimated overhead cost by the total estimated number of units.
Under absorption of overhead means:
If the actual overhead is more than the total estimated overhead, then it results in under absorption of overhead
Over absorption of overhead means:
If the actual overhead in the particular year is lesser than the predetermined overhead, it will result in over absorption of overhead.
Disposing of ...
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