Applied Manufacturing Overhead and Overhead Cost Comparison

MANAGEMENT
ACCOUNTING
STUDENT ID:
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Introduction
Voltus Communication is a leading manufacturer of communication equipment. The
company follows the job costing system. Also, with regards to allocation of manufacturing
overhead costs, it uses machine hour as the suitable base. In light of the above information
and provided costing details, the objective of the given report is to compute the applied
manufacturing overhead and compare the same with actual manufacturing overhead cost.
Additionally, the methods for disposal of under-application or over-application of overhead
costs along with suitability of activity based costing for overhead allocation has also been
briefly discussed.
Discussion
The relevant questions are answered in this section.
Question 1
Budgeted overhead cost = $ 3,600,000
The suitable base for the allocation of overhead cost has been chosen as machine hours
Budgeted machine hours = 80,000 machine hours
Pre-determined overhead rate = (3,600,000/80,000) = $ 45 per machine hour
Total machine hours actually used for the period between July 1, 2018 and May 31,2019 =
73,000 hours
Hence, manufacturing overhead applied by Voltus ( July 1, 2018 to May 31, 2019) =
73,000*45 = $3,285,000
Question 2
The pre-determined overhead head to be applied has already been determined as $45 per
machine hour. It is also known that total machine hours used for jobs finished in June 2019 is
6,000 hours.
Hence, manufacturing overhead applied by Voltus (June 2019) = 6,000*45 = $270,000
Question 3