Overhead absorption rate per labor hour = $20

Overhead absorption rate per machine hour = $15

Product X requires 2 and a half hours of machine and 8 hours of labor.

During the year, the company absorbed overheads totaling $140,000.

However, actual fixed production overheads were $100,000. Which of the following is true?

a) Product X should be sold for at least $197.5

b) Over absorbed overheads are $40,000. This is an expense that reduces profit.

c) One hour of machine is more expensive than one hour of labor in terms of overheads.

d) All of the answers are wrong.