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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.
All of those costs must be considered when determining manufacturing overhead. Calculating Manufacturing Overhead Cost Per Unit. It is important to determine manufacturing overhead cost per unit produced so that you can profitably price your products. Here is the formula to determine manufacturing overhead cost per unit: Manufacturing Overhead Per Unit = Total Manufacturing Overhead / Total Units Produced Ã