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4-24 Budgeted manufacturing overhead rate, allocated manufacturing overhead. Gammaro Company uses normal costing. It allocates manufacturing...

4-24 Budgeted manufacturing overhead rate, allocated manufacturing overhead. Gammaro 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

$4,600,000

Budgeted machine-hours

     184,000

Actual manufacturing overhead costs

$4,830,000

Actual machine-hours

     180,000

Required:

  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 Gammaro’s managers need to calculate this amount?
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Answer #1

Answer :

The budgeted manufacturing overhead rate = Budgeted manufacturing overhead costs / Budgeted machine hours

= $4,600,000 /184,000

= $25

The Manufacturing overhead allocated during 2017 = Actual machine hours * Budgeted manufacturing overhead rate

= 180,000*$25

= $4,500,000

The amount of under - or over allocated manufacturing overhead

The manufacturing overhead allocated during 2017 = $4,500,000

Actual manufacturing overhead costs = $4,830,000

Hence, Manufacturing overhead costs over allocated = Manufacturing overhead allocated during 2017

= $4,500,000 - $4,830,000

= $ - 330,000

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