A-LevelAccountingTraditional costing methods9706/12 · Feb/Mar 2016 · Q231 Mark

A production centre uses 20000 machine hours and 17000 labour hours each month. Which formula is used to calculate the overhead absorption rate?

Atotal machine hours / total overhead cost

Btotal overhead cost / total labour hours

Ctotal overhead cost / total (labour hours + machine hours) ÷ 2

Dtotal overhead cost / total machine hours

✓ Correct answer

D: total overhead cost / total machine hours

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Topic: Traditional costing methods, A-Level Accounting (syllabus 9706). Multiple choice, 1 mark.
Source: A-Level Accounting, Feb/Mar 2016 Paper 1 Variant 2, question 23.

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