Armidale Electronics manufactures surround sound systems and applies manufacturing costs

Armidale Electronics manufactures surround sound systems and applies manufacturing costs to production at a budgeted indirect-cost rate of $22 per direct-labor hour. The following data are obtained from the accounting records for August 2012:

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

Required:

a. What actual amount of manufacturing overhead cost was incurred during August 2012?

b. What amount of manufacturing overhead was allocated to all jobs during August 2012?

c. For August 2012, was manufacturing overhead under-allocated or over-allocated? Explain.

d. What are the implications for the company, based on your outcome for ‘c’?



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