Shahid Company manufactures insulation and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of Rs15 per direct labor-hour. The following data are obtained from the accounting records for June 2014: Direct materials Rs440,000 Direct labor (3,500 hours @ Rs11/hour) 38,500 Indirect labor 15,000 Plant facility rent 50,000 Depreciation on plant machinery and equipment 35,000 Sales commissions 10,000 Administrative expenses 25,000

Required:

1. The actual amount of manufacturing overhead costs incurred in June 2014

2. The budgeted amount of manufacturing overhead costs incurred in June 2014

3. Calculate the over or under applied manufacturing overhead costs and

4. What do you observe about the difference in part 3?

5. Why is manufacturing overhead cost applied?