XYZ Ltd manufactures radio controlled cars and applies manufacturing costs to production at a budgeted indirect-cost rate of $22 per direct-labour hour. The following data are obtained from the accounting records for Jan 2013:
- Direct materials $350,000
- Direct labor (7,000 hours @ $15/hour) $105,000
- Indirect labor $15,000
- Plant lease $75,000
- Depreciation on plant and equipment $40,000
- Marketing expense $20,000
- Plant utilities $15,000
a. What actual amount of manufacturing overhead cost was incurred during Jan 2013?
b. What amount of manufacturing overhead was allocated to all jobs during Jan 2013?
c. For Jan 2013, was manufacturing overhead under-allocated or over-allocated? Explain.
d. What are the implications for the company, based on your outcome for ‘c'?