MPX Resources uses absorption costing with a predetermined hourly fixed overhead absorption rate. For the year ended $31$ December $2023,$ the following situations arose:

Actual overheads were less than the budgeted expenditure; and

Actual hours worked were less that the budgeted hours used to set the predetermine overhead absorption rate.

Required:

Which of the following statements is correct?

A$.$ Both situations would cause the overheads to be over$-$absorbed$.$

B$.$ Both situations would cause the overheads to be under$-$absorbed$.$

C$.$ Situation $1$ would cause the overheads to be under$-$absorbed and situation $2$ would cause the overheads to be overabsorbed.

$◻$ D$.$ Situation $1$ would cause the overheads to be over$-$absorbed and situation $2$ would cause the overheads to be underabsorbed.

Answer rating: 100% (QA)

The correct statement would be D Situation 1 would cause the overheads to be overabsorbed a... View the full answer