Hello Francisca,
The overheads that occurred in the period will still be the same in 10.1 c), there is no change to that. But the fact that the company estimated a budgeted overhead rate of 4€ can lead to them having to register Over-recovery or Under-recovery of overheads if the budgeted allocation rate is different from the real allocation rate. And that is the case in this exercise.
If you look at the P&L from 10.1a, COGS will sum up yo 41.253.000, but the COGS in P&L of 10.1c will be only 40.478.000. That happens because the 4€ of budgeted overhead allocation rate was an underestimation. Because of that, you will need to register Under-recovery of overhead of 775.000, and the Operating profit will be the same in both P&Ls.
Hope this helps!
Pedro Perdigão
The overheads that occurred in the period will still be the same in 10.1 c), there is no change to that. But the fact that the company estimated a budgeted overhead rate of 4€ can lead to them having to register Over-recovery or Under-recovery of overheads if the budgeted allocation rate is different from the real allocation rate. And that is the case in this exercise.
If you look at the P&L from 10.1a, COGS will sum up yo 41.253.000, but the COGS in P&L of 10.1c will be only 40.478.000. That happens because the 4€ of budgeted overhead allocation rate was an underestimation. Because of that, you will need to register Under-recovery of overhead of 775.000, and the Operating profit will be the same in both P&Ls.
Hope this helps!
Pedro Perdigão