Managerial Accounting Standard Hours Question Need Help

Question

Teana Corporation uses machine hours as its denominator activity for fixed manufacturing overhead. For the most recent year, the company showed the following data:
At the beginning of the year :
Budgeted Machine Hours (denominator level) : 600,000 Machine Hours
At the end of the year:
Actual Fixed Manufacturing Overhead : $260,000
Fixed Manufacturing Overhead Budget Variance : $20,000 Favorable
Fixed Manufacturing Overhead Volume Variance : $15,000 Favorable

Question : Teana's standard machine hours allowed for actual output was closest to ?
A) 562,500 Machine Hours B) 632,143 Machine Hours C) 637,500 Machine Hours D) 567,857 Machine Hours E) None
Answer was B) but I need help with steps as to how.

Answer 1

The correct answer is option B) 632,143 machine hours

In the problem we were given the Actual Fixed Manufacturing Overhead $260,000 and the Fixed MFG OH budget variance of 20,000 Favorable. If we add the two together we will arrive at the budgeted Fixed MFG OH which was $280,000. To come up with the machine hours budget rate divide $280,000 BY 600,000 machine hours=.46666.

Also, we were given fixed MFG OH volume variance $15,000 favorable. To come up with the actual machine hours divide 15,000 by .46666 = 32,143 +600,000 budgeted hours= 632,143 actual standard machine hours.