Kitchen Works Ltd is a carpentry business that specializes in the production of kitchen cabinets. The company budgeted to produce 44,000 kitchen chairs for the month of January, but actually produced 48,800. Its sales were 40,800 units at a price of £100 per unit.

Sales commission is paid at 10% of revenue. There was no opening inventory and budgeted costs were the same as actual costs.

Required

1. Compute the over- or underallocated manufacturing overheads.
2. Compute the total manufacturing costs.
3. Show how the over- or underallocated manufacturing overheads affects the income of Kitchen Wood Ltd.

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Budgeted costs for January: Direct material Direct labor Variable production costs Fixed Overheads: Manufacturing Administrative Selling £36 per unit £ 8 per unit £6 per unit £792,000 £208,000 £112,000