Problem:
The cost accountant of Nono Chemicals Ltd determined the overhead-recovery rate for the year 2009 (based on direct-labour hours) with the following estimates:
|
Rs.
|
|
Indirect labour
|
1,15,000
|
|
Inspection
|
70,000
|
|
Factory supervision
|
50,000
|
|
Depreciation & Maintenance
|
1,25,000
|
|
3,60,000
|
|
Direct labour hours
|
75,000 hours
|
|
Hourly wage rate
|
Rs. 15
|
The actual results for the years are:
|
|
|
Indirect labour
|
99,000
|
|
Inspection
|
73,000
|
|
Factory supervision
|
51,000
|
|
Depreciation & Maintenance
|
1,15,000
|
|
3,38,000
|
|
Direct labour hours
|
67,600
|
|
Hourly wage rate
|
Rs. 16
|
Calculate the predetermined overhead recovery rate and find out the amount of under- or over-absorption, if any.