Over and Under Absorption of Overheads | Absorption Costing | A level Accounting 9706

Welcome, Cambridge A Level Accounting students, to our insightful video on over and under absorption of overheads in absorption costing! In this tutorial, we'll explore what over absorption and under absorption mean and how they affect a company's financial performance. In simple terms, over absorption occurs when the applied overheads (calculated using the budgeted Overhead Absorption Rate or OAR) exceed the actual overhead costs incurred during a period. On the other hand, under absorption occurs when the applied overheads are less than the actual overhead costs. This lesson will cover the following areas: 1. **Over Absorption**: You'll learn about over absorption, which happens when the applied overhead costs exceed the actual overhead costs incurred by a business during a specific period. 2. **Under Absorption**: We'll discuss under absorption, which occurs when the applied overhead costs are less than the actual overhead costs incurred by a business during a specific period. 3. **Applied Overheads**: You'll understand the concept of applied overheads, which are the overhead costs allocated to production using the budgeted Overhead Absorption Rate (OAR). 4. **Budgeted Overhead Absorption Rate (OAR)**: We'll explain the importance of the budgeted Overhead Absorption Rate (OAR), which is used to calculate applied overheads based on budgeted overhead costs and a chosen allocation base. By the end of this tutorial, CAIE AS Level Accounting students will have a solid understanding of over and under absorption of overheads in absorption costing, empowering you to analyze and interpret financial performance effectively. ________________________________________________________________________ If you like what you saw here and Elasticity has started to make a whole lot more sense, head over to www.altacademy.org for access to: 1. Bite-sized video lessons 2. Detailed Past Paper walkthrough videos 3. Exam specific Revision Guides and Notes 4. Expert led academic support for whenever you’re stuck 5. Tons of practice worksheets and mocks 6. Past Paper bank 7. An active and global online community, with learners just like yourself If you have any other questions, queries or concerns, out to us at: Email: help@altacademy.org WhatsApp: +92 301 559 4483 Instagram: www.instagram.com/altacademyorg/ Facebook: www.facebook.com/altacademyorg/ Can't wait to hear from you! 🚀 🌐 www.altacademy.org