Question

The MartinezMartinez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto​ part, based on a denominator level of 4,500 output units per​ year, included 5 ​machine-hours of variable manufacturing overhead at $7 per hour and 5 ​machine-hours of fixed manufacturing overhead at $15 per hour. Actual output produced was 4,800 units. Variable manufacturing overhead incurred was $ 240,000. Fixed manufacturing overhead incurred was $ 385,000. Actual​ machine-hours were 29,000.

Variable OH Actual Cost Incurred? Actual Input X Budgeted Rate ? Flexible Budget ? Allocated Overhead.

Including calculations

Actual

Answer 1

Information given:

Standard output production per year 4,500 units

Actual output per year produced per year 4,800 units

Particulars	Hours	Rate per hour (In $)	Standard cost per hour (In $)
machine-hours of variable manufacturing overhead	5.00	7.00	35.00
machine-hours of fixed manufacturing overhead	5.00	15.00	75.00

Variable manufacturing overhead incurred (Actual) - $ 240,000.

Fixed manufacturing overhead incurred (Actual)       - $ 385,000

Actual machine hours : 29,000 hours

1. Variable OH Actual Cost Incurred –

        Total Variable OH actual cost incurred = $ 240,000

     

         Variable OH actual cost per unit = Total Variable OH cost incurred

                                                                               Total output in units

                                                                   =      $ 240,000

                                                                             4800 units   

                                                                   =       $ 50 per unit

        Variable OH actual cost per hour   =         Total Variable OH cost incurred

                                                                                        Total actual hours

                                                                     

                                                                      =            $   240,000        

                                                                                       29000 hours

                                                                        =            $   8.28 per hour

2. Actual Input X Budgeted Rate

= Machine hour * Budgeted rate per hour

= 29000 hours * 23.00/ hour [$ 7.00 + $ 15.00 ] <Refer given information above>

=   $667,000

3.   Flexible Budget:

Actual Production = 4800 units

Variable manufacturing overhead cost (4800 units * 35 per unit)      =         $ 168,000                                                                

<Refer given information above>    

Fixed manufacturing overhead cost (4800 units * 75 per unit)          =          $ 360,000

<Refer given information above>

                                                                                                                                       

Total =     $528,000

4. Allocated Overhead.

Fixed overhead allocated   = Actual hours * standard rate per hour

                                                  = 29000 hours * $ 15 per hour

                                                  = $ 435,000