Reference no: EM132609945

APP Limited is a manufacturing concern and recovers overheads at a pre-determined rate of Rs.250 per man-day. The following additional information of a period are also available for You:

Total factory overheads incurred                 Rs.55,00,000

Man-days actually worked Sales (in units)        20,000

Stock at the end of the period:                    25,000

Completed units                                          2,500

Incomplete units (50% completed)                5,000

There was no opening stock of finished goods and works in progress. On analyzing the situation, it was discovered that 40% of the unabsorbed overheads were due to defective planning and balance were attributable to increase in overhead costs.

Question 1: How would you treat unabsorbed overheads in cost accounts?