• Question: I'm taking managerial accounting and have a quick question about calculating overhead allocation rates. I understand you divide total MOH by the total amounts of units of allocation. What I don't totally understand is why you divide the entire MOH. For example, if total MOH is $800,000 and total machine hours is 40,000 the overehad rate would be $20. My

  I$\text{'}$m taking managerial accounting and have a quick question about calculating overhead allocation rates. I understand you divide total MOH by the total amounts of units of allocation. What I don't totally understand is why you divide the entire MOH. For example, if total MOH is $$800,000$ and total machine hours is $40,000$ the overehad rate would be $$20.$ My question is this: Machine hours doesn't make up the entirety of MOH so why divide the enitrety of MOH to get the allocation rate?Hope this makes sense.

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When calculating the overhead allocation rate you divide the entire amount of overhead costs by a ch... View the full answer