my working notes

1. CASSIOP
• Step1: Need to calculate the OAR-it
will enable you to find over/under
absorption. Also known as volume
variance.
• Definition:
 Over absorption: This occurs when
budgeted fixed over heads are less
than the budgeted amount[some sort
of a shortage]
 Suppose that we have budgted fixed
overheads of 30000 and an activity
level based on hours of production of
1500. Then OAR=Budgeted fixed
overheads/budgeted
activty=20units/labour hr.
 Now if the actual fixed overheads are
now 25000 at the same activity of
1500 then OAR=16.67

2. AC vs MC
• AC • Areas requiring subjective
• Ac is not suited to judgements in AC
decision making making  Estimates
because of the subjective  Apportionment method
judgements it makes.  Recovery Rate
• It can be said that the  R&d
principal aim of Ac is not
to produce accurate  Use of Estimate
information but to ensure
that all o/h are charged to
products