At the beginning of last year, Tarind Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours. At the end of the year, Tari's fixed manufacturing overhead budget variance was $12,000 favorable. Its fixed manufacturing overhead volume variance was $19,200 favorable. Actual direct labor-hours for the year were 625,000. What was Tari's total standard machine-hours allowed for last year's output?

The answer is 612800 hours

Explanation:

Solution

Recall that:

At the start of last year, Tari Corporation budgeted $900,000 of fixed manufacturing overhead and chose a denominator level of activity of 600,000 machine-hours.

At the end of the year, Tari's fixed manufacturing overhead budget variance was $12000 favorable. Its fixed manufacturing overhead volume variance was $19200 favorable. The direct actual labor-hours for the year were 625,000. What was Tari's standard total machine-hours allowed for last year's output?

Now,

The Budgeted at beginning of the year = $900,000

fixed manufacturing overhead for = 600,000 machine hours

Thus,

The Standard = $900,000 / 600,000 hours = $1.5 fixed overhead / machine/machining hour

So,

At end of year, manufacturing overhead volume was $19,200 favorable which means that,

$19200 / $1.5 = 12800 additional hours.

Total Standard Machine Allowance Allowed for output = 600,000 + 12800 = 612800 hours

Therefore, Tari's total standard machine-hours allowed for last year's output is 612800 hours