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

Question

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $75,000 ÷ 150,000 machine-hours = $0.50 per machine-hour
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

At the Beginning of Last Year, Tarind Corporation Budgeted $75,000