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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.
Manufacturing overhead is all of the costs that a factory incurs, other than the variable costs required to build products, such as direct materials and direct labor. This overhead is applied to the units produced within a reporting period.Examples of costs that are included in the manufacturing overhead category are:anufacturing overhead is all of the costs that a factory incurs, other than the variable costs required to build products, such as direct materials and direct labor. This overhead is applied to the units produced within a reporting period. Examples of costs that are included in the manufacturing overhead category are: