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This is the total cost per unit of $4.30 multiplied by 150,000 machine hours budgeted. The question asks for the annual budgeted overhead, not the annual budgeted total cost.
First, we need to figure out how much overhead was applied to each of the 1,000 units. We then use that to figure out how much overhead had been applied per machine hour used. That, multiplied by the 150,000 machine hours budgeted will give us the total amount of annual budgeted overhead. Total cost/unit applied = $4.30. Direct materials cost/unit applied = $1,000 ÷ 1,000 units = $1.00/unit Direct labor cost/unit applied = $1,500 ÷ 1,000 units = $1.50/unit Therefore, total overhead applied/unit = $4.30 ? $1.00 ? $1.50 = $1.80 The total overhead applied for the 1,000 units was $1.80 × 1,000 units = $1,800. That was for 450 hours. $1,800 ÷ 450 hours = $4 per machine hour that was applied. That means each planned machine hour was budgeted to receive $4 of overhead cost. 150,000 machine hours had been budgeted for the year. If each machine hour was budgeted to receive $4 of overhead, then total budgeted overhead for the year was 150,000 × $4 = $600,000.
This is the actual overhead incurred on the job of $1,980 divided by 450 hours used for the job and then multiplied by 150,000 budgeted hours for the full year. The budgeted overhead, i.e., the overhead applied to this job, should be used instead of the actual overhead incurred.