Allen, Inc. has budgeted $120,000 in variable overhead and $72,000 in fixed overhead for the current month. 8,000 custom units were expected to be produced using 60,000 machine hours. During the month, Allen actually used 68,096 machine hours and produced 8,960 units. Actual overhead costs were: $132,000 variable and $73,600 fixed.
Assume Allen uses a normal costing system. The variable overhead allocated would be:
A) $136,192
B) $132,000
C) $134,400
D) $120,000

Question

Quizplus · Accepted Answer

The variable overhead rate per machine hour is $120,000 / 60,000 = $2 per machine hour. For 68,096 machine hours, the allocated variable overhead is 68,096 * $2 = $136,192.