Asked by alonna michaux on May 21, 2024
Verified
At the beginning of last year, Tarind Corporation budgeted $75,000 of fixed manufacturing overhead and chose a denominator level of activity of 150,000 machine-hours.At the end of the year, Tari's fixed manufacturing overhead budget variance was $2,250 favorable.Its fixed manufacturing overhead volume variance was $3,750 favorable.Actual direct labor-hours for the year were 156,250.What was Tari's total standard machine-hours allowed for last year's output?
A) 157,500
B) 162,000
C) 164,000
D) 142,500
Machine-Hours
A measure of production time using machines, typically used as a basis for allocating manufacturing overhead to products.
Denominator Level
In cost accounting, refers to the total quantity or capacity used to allocate fixed costs to different cost objects.
Budget Variance
The difference between what was budgeted for a period and what was actually spent or received.
- Understand the concept and calculation of standard machine-hours and standard labor-hours
Verified Answer
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
$3,750 F = $0.50 per machine-hour × (150,000 machine-hours - Standard hours allowed for the actual output)
-$3,750 = $0.50 per machine-hour × (150,000 machine-hours - Standard hours allowed for the actual output)
-$3,750 = $75,000 - ($0.50 per machine-hour × Standard hours allowed for the actual output)
$0.50 per machine-hour × Standard hours allowed for the actual output = $75,000 + $3,750
$0.50 per machine-hour × Standard hours allowed for the actual output = $78,750
Standard hours allowed for the actual output = $78,750 ÷ $0.50 per machine-hour
Standard hours allowed for the actual output = 157,500 machine-hours
Learning Objectives
- Understand the concept and calculation of standard machine-hours and standard labor-hours
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