[amp_mcq option1=”over absorption” option2=”under absorption” option3=”equal absorption” option4=”major absorption” correct=”option2″]<\/p>\n
The correct answer is B. under absorption.<\/p>\n
Overhead absorption is the process of allocating overhead costs to products or services. When actual overhead is less than the absorbed overhead, it is called under absorption. This can happen when production is lower than expected, or when overhead costs are higher than expected. Under absorption can lead to a decrease in net income, as the company will have to record the difference as an expense.<\/p>\n
Over absorption is the opposite of under absorption. It occurs when actual overhead is more than the absorbed overhead. This can happen when production is higher than expected, or when overhead costs are lower than expected. Over absorption can lead to an increase in net income, as the company will have to record the difference as a gain.<\/p>\n
Equal absorption occurs when actual overhead is equal to the absorbed overhead. This is the ideal situation, as it means that the company has accurately allocated its overhead costs.<\/p>\n
Major absorption is not a term that is used in accounting.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”over absorption” option2=”under absorption” option3=”equal absorption” option4=”major absorption” correct=”option2″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[952],"tags":[],"class_list":["post-45550","post","type-post","status-publish","format-standard","hentry","category-costing","no-featured-image-padding"],"yoast_head":"\n