Question

At the beginning of last year, tarind corporation budgeted $1,000,000 of fixed manufacturing overhead and chose a denominator level of activity of 500,000 machine-hours. At the end of the year, tari's fixed manufacturing overhead budget variance was $14,000 favorable. Its fixed manufacturing overhead volume variance was $20,000 favorable. Actual direct labor-hours for the year were 525,000. What was tari's total standard machine-hours allowed for last year's output?.

Answer 1

The tari's total standard machine-hours allowed for last year's output 600,000 hours

Budgeted at start of year:  $100,000 fixed manufacturing overhead  for 500,000 machine hours

Standard = $100,000 / 500,000 hours = $0.2 fixed overhead / maching hour

At end of year, manufacturing overhead volume was $20,000 favorable which means

$20000 / $1=0.2 = 100000 additional hours.

Total Standard Machine Allowance Allowed for output = 500,000 + 100,000 = 600,000 hours.

the use of one machine running for an hour as a basis for cost estimation and operating effectiveness evaluation. In order to determine the contribution margin per machine hour for a specific product: a. Total cost per unit divided by the quantity of machine hours required to produce each unit of the target product. The manufacturing overhead cost divided by the activity driver yields the predetermined overhead rate. For instance, if machine hours were the activity driver, you would divide overhead costs by the anticipated number of machine hours.

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