Cima C01 Exam Question No 6

Question No 6:

ABC absorbs fixed production overheads in one of its departments on the basis of machine hours. There were 100,000 budgeted machine hours for the forthcoming period. The fixed production overhead absorption rate was £2·50 per machine hour.
During the period, the following actual results were recorded:
Standard machine hours 110,000
Fixed production overheads $300,000
Which ONE of the following statements is correct?

A. Overhead was $25,000 over-absorbed
B. Overhead was $25,000 under-absorbed
C. Overhead was $50,000 over-absorbed
D. No under- or over-absorption occurred

Answer: B