Question

Martinson Inc. manufactures industrial-sized landscaping trailers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 40,000 units Budgeted machine-hours 10,000 hours Budgeted variable manufacturing overhead costs for 40,000 units $310,000 Actual output units produced 36,500 units Actual machine-hours used 14,600 hours Actual variable manufacturing overhead costs $350,400 What is the budgeted variable overhead cost rate per output unit

Answer 1

Overhead rate per unit= $124

Step-by-step explanation:

Giving the following information:

Budgeted output units 40,000 units

Budgeted machine-hours 10,000 hours

Budgeted variable manufacturing overhead costs for 40,000 units $310,000

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 310,000 / 10,000

Predetermined manufacturing overhead rate= $31 per machine hour

Now, for each unit:

Machine hours per unit= 40,000/10,000= 4

Overhead rate per unit= 31*4

Overhead rate per unit= $124