A company allocates production overheads using a rate per activity hour.

BUDGETED Information:

Manufacturing overheads = 45,000

Activity in hours per year = 1,500 hours

Overhead rate per activity hour = 30

What is the under- or over- absorption of overheads if the actual activity is 1,500 hours and actual overheads are 40,000?

a. 15,000 under

b. 5,000 over

c. There is no under- or over- absorption

d. 5,000 under

e. 15,000 over