Question

" gut uutui Lusung? 4-24 Budgeted manufacturing overhead rate, allocated manufacturing overhead. Taylor Company uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine-hour. The following data are available for 2017: Budgeted manufacturing overhead costs Budgeted machine-hours Actual manufacturing overhead costs Actual machine-hours $3,800,000 200,000 $3,660,000 196,000 1. Calculate the budgeted manufacturing overhead rate. 2. Calculate the manufacturing overhead allocated during 2017. 3. Calculate the amount of under- or overallocated manufacturing overhead. Why do Taylor's managers need to calculate this amount?

Answer 1

1.)	Budgeted manufacturing overhead rate	= Budgeted manufacturing overhead cost / Budgeted machine hours
		= 3,800,000 / 200,000
		= $ 19 per machine Hour
2.)	Manufacturing overhead allocated during 2017	= Actual machine hours x Budgeted manufacturing overhead rate
		= 196,000 x 19
		= $ 3,724,000
3.)	The amount of Overallocated manufacturing overhead	= Overhead allocated - Actual Overhead
		= 3,724,000 - 3,660,000
		= $ 64,000

Taylor's managers need to calculate this amount so that they can reduce their cost of goods sold with amount of overallocated manufacturing overhead.