Machine Hour Absorption Rate Formula

Machine Hour Absorption Rate Formula

An absorption rate is calculated on the bases of machine hour used by the different product is known as machine hour absorption rate or absorption rate based on machine hours. Machine hour absorption rate may be calculated by dividing production overheads with total number of machine hours.

Absorption Rate (Machine Hr) = Production Overhead/Total Machine Hours

Machine Hour Absorption Rate Formula Example

Total overhead expenditure is $ 150,000 for two products (A, B). Total production hour is required for production is 10,000 (Hr). Calculate machine Hour Absorption Rate

Absorption Rate (Machine Hr) = Production overhead/Total machine hours

= $ 150,000 (production overhead)/ 10,000 Total Machine Hours

= $ 150,000/ 10,000

= $ 15