Micro Enterprises Planned to Produce 120,000 Lerts Per Year

Multiple Choice

Micro Enterprises planned to produce 120,000 lerts per year. Annual overheads, of which 32.5% are variable, are estimated at $320,400. Each lert takes 1.2 machine hours and 3 labor hours to produce. The firm allocates overhead by direct labor hours. In March, when 11,500 lerts were produced, 33,500 direct labor hours were recorded and expenditures on overheads amounted to $31,200. Which is true for this month?

A) Under-applied overheads are $495
B) Over-applied overheads are $495
C) Under-applied overheads are $1,385
D) Over-applied overheads are $1,385
E) None of the above