In a manufacturing unit factory overhead was recovered at a pre-determined rate of Rs.25 per man day. The total factory overhead expenses incurred and the man-days actually worked were Rs.41.50 lakhs and 1.5 lakhs man-days respectively. Out of the 40,000 units produced during a period, 30,000 were sold.

On analysing the reason, it was found that 60% of the unabsorbed overheads were due to defective planning and the rest were attributable to increase in overhead costs.

How would unabsorbed overheads to be treated in Cost Accounts?

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