Question

Horn Industries uses a standard cost accounting system and allocates variable manufacturing overhead costs based on machine hours. Here are data regarding Horn's production activity for the month of July: Actual total variable manufacturing overhead costs $11,312 Actual total machine hours 1,600 hours Variable manufacturing overhead rate variance $1,712 unfavorable Variable manufacturing overhead spending variance $2,312 unfavorable What is the standard number of machine hours allowed for July production? 1.450 hours 1,500 hours 1,650 hours O 1.700 hours None of the above

Answer 1

The standard number of machine hours allowed for July production is approximately 1,127.15 hours. Here option E is correct.

To find the standard number of machine hours allowed for July production, we need to calculate the total standard variable manufacturing overhead cost for the actual machine hours worked and then divide it by the standard variable manufacturing overhead rate.

Let's denote the standard variable manufacturing overhead rate as R and the standard number of machine hours allowed as H.

Given data:

Actual total variable manufacturing overhead costs = $11,312

Actual total machine hours = 1,600 hours

Variable manufacturing overhead rate variance = $1,712 unfavorable

Variable manufacturing overhead spending variance = $2,312 unfavorable

The formula for calculating the total variable manufacturing overhead costs using the rate and spending variances is:

Actual Total Variable Manufacturing Overhead Costs = (Standard Variable Manufacturing Overhead Rate × Actual Total Machine Hours) + Variable Manufacturing Overhead Spending Variance

$11,312 = (R × 1,600) - $2,312

Now, we can calculate the standard variable manufacturing overhead rate (R):

$11,312 + $2,312 = R × 1,600

$13,624 = R × 1,600

R = $13,624 ÷ 1,600

R = $8.515 per machine hour

Next, we can find the standard number of machine hours allowed (H):

$11,312 = ($8.515 × H) + $1,712

$11,312 - $1,712 = $8.515 × H

$9,600 = $8.515 × H

H = $9,600 ÷ $8.515

H ≈ 1,127.15 hours

Here option E is correct.

To learn more about production

Complete question:

Horn Industries uses a standard cost accounting system and allocates variable manufacturing overhead costs based on machine hours. Here are data regarding Horn's production activity for the month of July: Actual total variable manufacturing overhead costs $11,312 Actual total machine hours 1,600 hours Variable manufacturing overhead rate variance $1,712 unfavorable Variable manufacturing overhead spending variance $2,312 unfavorable What is the standard number of machine hours allowed for July production?

A - 1.450 hours

B - 1,500 hours

C - 1,650 hours

D - 1.700 hours

E - None of the above