Data regarding Lager Ltds production for the year is given b

Data regarding Lager Ltd.’s production for the year is given below:

Per unit information:

Direct labour

$13

Direct material

9

Applied manufacturing overhead

9

Unit production (budget)

30343

Unit production (actual)

23063

Actual overhead costs incurred

$134892

Lager Ltd.’s manufacturing overhead for the year was:

Select one:

a. Over-applied by $138195

b. Over-applied by $72675

c. Under-applied by $72675

d. Under-applied by $138195

Solution

Overhead applied

= Unit production (actual) x Overhead application rate

= 23,063 units x $ 9 per unit

= $ 207,567

Over-applied overhead

= Overhead applied - Actual overhead costs incurred

= $207,567 - $134,892

= $72,675

So, as per above calculations, option b is the correct option