Ch 3 · Overheads — Absorption Costing

⭐ Important points (exam-critical)

• ⭐Machine Hour Rate preferred where machine work dominates over labour.
• ⭐Simultaneous equation method most accurate for service-to-service sharing.
• ⭐If under-absorption due to abnormal causes — debit to costing P&L.
• ⭐Capacity utilisation impacts absorption rate — distinguish budgeted vs normal capacity.