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The total overhead expenses of a factory are Rs. 4

The total overhead expenses of a factory are Rs. 4,46,380. Taking into account, the normal working of the factory, overhead was recovered in production at Rs. 1.25 per hour. The actual hours worked were 2,93,104. How would you proceed to close the books of accounts, assuming that besides 7,800 units produced of which 7,000 were sold, there were 200 equivalent units in work in progress. On investigation, it was found that 50% of the unabsorbed overhead was on account of increase in the cost of indirect materials and indirect labor and the remaining 50% was due to factory inefficiency. Also give the profit implication of the method suggested.

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