A company uses an overhead absorption rate of $3.50 per machine hour, based on 32,000 budgeted machine hours for the period. During the same period the actual total overhead expenditure amounted to $108,875 and 30,000 machine hours were recorded on actual production.
By how much was the total overhead under- or over-absorbed for the period?
(a) Under-absorbed by $3875
(b) Under-absorbed by $7000
(c) Over-absorbed by $3875
(d) Over-absorbed by $7000