Kumar Inc. produces running shoes for basketball players. The company uses a plantwide overhead rate, based on machine hours as the cost driver, to determine the total cost of production. At the start of the year the company estimates total overhead of $54,000 and total machine hours of 12,000 hours.

They also have the following actual information:

Quantity produced (units)	2,000 units
Selling price per unit	$280
Total direct materials	$120,000
Total direct labour costs	$160,000
Total machine hours	12,800 hrs

a) Calculate the overhead rate based on machine hours.

b) Calculate the total cost of the running shoes produced, including the overhead applied.

c) Calculate the amount the customer will be billed if Kumar Inc. charges cost plus 70%.

d) Assume the actual overhead costs incurred by the company to produce the running shoes is $61,000. Was overhead over- or under-applied and by how much?