ABC Ltd manufactures a single product and absorbs the production overheads at a predetermined rate of `100 per machine-hour. At the end of current financial year, it has been found that actual...

ABC Ltd manufactures a single product and absorbs the production overheads at a predetermined rate of `100 per machine-hour.

At the end of current financial year, it has been found that actual production overheads incurred were `6,00,000. It included `45,000 on account of ‘written off’ obsolete stores and `30,000 being the wages paid for the strike period under an award.

The production and sales data for the current year is as under:

The actual machine-hours worked during the period were 4,800. It has been found that one-third of the under-absorption of production overheads was due to lack of production planning and the rest was attributable to normal increase in costs. You are required to: (i) Calculate the amount of under-absorption of production overheads during the current year; and (ii) Show the accounting treatment of under-absorption of production overheads.