Machine Absorption Rate Formula

Machine Absorption Rate Formula

Machine Absorption Rate Formula =   Production Overhead    x 100                                                       Budgeted Machine Hrs

Machine hour labour rate is calculated by dividing production overhead with budgeted machine hours.

Machine Absorption Rate Formula Example

Production Overheads= 450,000

Machine Hours= 15,000

Solution

= $ 450,000 (production overhead)/ 10,000 Total Machine Hours

= $ 150,000/ 1,000

= $ 10 (Machine Absorption Rate)