SP Limited operates an absorption costing system. It uses a predetermined overhead absorption rate based on machine hours. Budgeted factory overheads for the year were £1,080,000 but actual overhead incurred was £1,046,000. Budgeted machine hours were 120,000 and actual machine hours were 119,000.
Overheads for the period were.
A . Under-absorbed by £25,000
B . Under-absorbed by £9,000
C . Over-absorbed by £25,000
D . Over-absorbed by £9,000
Answer: C