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Chilton allocates variable manufacturing overhead costs on the basis of machine hours. Chilton budgeted .5 machine hours per lamp and allocates overhead at a rate of $1.80 per machine hour. Last year Chilton manufactured 23,000 lamps, used 13,800 machine hours and incurred actual overhead costs of $15,180.
$165,820 Manufacturing Overhead Budget May Budgeted direct labor-hours 8,600 Variable manufacturing overhead rate $9.40 Variable manufacturing overhead $80,840 Fixed manufacturing overhead 103,200 Total manufacturing overhead (a) $184,040 Less depreciation 18,220 Cash disbursement for manufacturing overhead $165,820.ourley Clinic uses client-visits as its measure of activity. $14 F Planning budget ($6,900 + $.20 Ã 4,150) $ 7,730 Flexible budget ($6,900 + $.20 Ã 4,080) 7,716 Activity variance $ 14 Because the flexible budget is less than the planning budget, the variance is favorable (F).