Reference no: EM13509119

The following calendar year information about the Tahoma Corporation is available on December 31:

Advertising expense....................................... $ 28,800

Depreciation of factory equipment ................... 42,320

Depreciation of office equipment ...................... 10,800

Direct labor....................................................... 142,600

Factory utilities ............................................................................ 35,650

Interest expense .............................................................................. 6,650

Inventories, January 1:

Raw materials ............................................................................ 3,450

Goods in process .................................................................. 17,250

Finished goods ....................................................................... 35,650

Inventories, December 31:

Raw materials ............................................................................ 2,300

Goods in process .................................................................. 20,700

Finished goods ....................................................................... 31,050

Raw materials purchases................................. 132,450

Rent on factory building .......................................................... 41,400

Indirect labor ................................................................................. 51,750

Sales commissions ..................................................................... 16,500

The company applies overhead on the basis of 125% of direct labor costs.

a. Calculate the amount of over- or under-applied overhead.

b. What is the significance of this over- or under-applied amount of overhead?