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 Budgeted machine-hours Actual manufacturing overhead costs Actual machine-hours Required: $4,800,000 180,000 $3,990,000 150,000 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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Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit.  Overhead expenses depend upon the nature of the business operations.