DigiEar has invented and patented a new digital behind- the- ear hearing aid with adaptive noise reduction and automatic feedback cancellation. DigiEar produces four different models of its DigiEar device. The following table summarizes the planned production levels, costs, and selling prices for the four DigiEar devices for this year:

DigiEar allocates both fixed and variable manufacturing overhead to the four devices using a single overhead rate, which includes both fixed and variable manufacturing overhead. The number of direct labor hours in each device is used as the allocation base for assigning overhead to hearing aids. Budgeted volume measured using direct labor hours is calculated using the budgeted sales of each device. Variable manufacturing overhead is budgeted at $ 12.00 per direct labor hour and fixed manufacturing overhead is budgeted this year at $ 2,157,000.

Required:
a. Calculate DigiEar€™s budgeted manufacturing overhead rate per direct labor hour for this year.
b. Using absorption costing, calculate the budgeted manufacturing cost per unit for each of DigiEar€™s four hearing aid devices.
c. During the year, actual manufacturing overhead incurred ( fixed plus variable) was $ 3,110,000, and the actual number of direct labor hours used producing the four hearing aids was:

Calculate the over- or under absorbed overhead DigiEar has for this year.
d. Assuming that the entire over- or under absorbed overhead you calculated in part (c) is written off to cost of goods sold, does this write- off increase or decrease net income before taxes?Explain.

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DigiEar Hearing Aid Models A21 B45 C24 D88 Budgeted production and sales (units) 2000 $500 Selling price Direct labor (DL) hours per unit Direct material per unit Direct labor cost (wages, benefits, 8,000 $600 2.8 $120 5,000 $700 3.0 $130 3,000 $1,000 3.5 S150 2.0 $110 and payroll taxes) per DL hour $25 S25 $25 $25 A21 B45 024 D88 Actual direct labor hours 26,000 23,800 18,600 12.250