Pizzi,Inc.had the following fixed manufacturing overhead variances last year: Pizzi uses machine-hours as an activity base for overhead and used 48,000 machine-hours as the denominator activity level for the year.Total actual fixed manufacturing overhead was $150,000.The actual number of machine-hours incurred were 50,000.What were Pizzi's standard hours allowed for actual output?
A)40,000
B)42,000
C)50,400
D)52,500

Question

Pizzi,Inc.had the following fixed manufacturing overhead variances last year:  Pizzi uses machine-hours as an activity base for overhead and used 48,000 machine-hours as the denominator activity level for the year.Total actual fixed manufacturing overhead was $150,000.The actual number of machine-hours incurred were 50,000.What were Pizzi's standard hours allowed for actual output?
A)40,000 
B)42,000 
C)50,400 
D)52,500

Quizplus · Accepted Answer

Budget variance = Actual fixed overhead - Budgeted fixed overhead
$30,000 U = $150,000 - Budgeted fixed overhead
$30,000 = $150,000 - Budgeted fixed overhead
Budgeted fixed overhead = $150,000 - $30,000
Budgeted fixed overhead = $120,000
Fixed component of the predetermined overhead rate = $120,000 ÷ 48,000 MHs = $2.50 per MH
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
$6,000 F = $2.50 per MH × (48,000 MHs - Standard hours allowed for the actual output)
-$6,000 = $2.50 per MH × (48,000 MHs - Standard hours allowed for the actual output)
48,000 MHs - Standard hours allowed for the actual output = -$6,000 ÷ $2.50 per MH
48,000 MHs - Standard hours allowed for the actual output = -2,400 MHs
Standard hours allowed for the actual output = 48,000 MHs + 2,400 MHs
Standard hours allowed for the actual output = 50,400 MHs

Pizzi,IncHad the Following Fixed Manufacturing Overhead Variances Last Year