(Appendix 11A)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

(Appendix 11A)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 × (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