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Buller Company uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine-hour....

Buller Company uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine-hour. The following data are available for 2019: Budgeted manufacturing overhead costs $4,800,000 Budgeted machine-hours 180,000 Actual manufacturing overhead costs $3,990,000 Actual machine-hours 150,000 Required: 1. Calculate the budgeted manufacturing overhead rate. 2. Calculate the manufacturing overhead allocated during 2019. 3. Calculate the amount of under- or overallocated manufacturing overhead. Why do Buller’s managers need to calculate this amount?

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Answer #1

Part 1)budgeted manufacturing overhead rate(Predetermined rate)=Budgeted Overhead Costs/Budgeted Machine Hours=4800000/180000=$26.67 per hour

Part 2) Allocated Manufcturing Overhead=Predetermined rate*Actual Machine hours=26.67*150000=$4,000,500

Part 3) underallocated (overallocated) Overhead rate=Actual Cost-Allocated Overhead=3990000-4000500=$-10,500 (Overallocated)

Part 4) Manager need to allocate overhead rates in order to more accurately assess the cost of each product, set proper pricing and calculate profitability of each product. Further, proper calculation of overapplied/underapplied overhead rate is required to ensure accurate reporting in financial statements.

**there may slight difference in values due to rounding-off

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