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Trendy Coats applies overhead based on labor hours. It has a predetermined overhead application or standard rate of $5.00/hour. If they had 1000 standard hours and an unfavorable variable overhead efficiency variance of $400 Unfavorable, how many actual hours were used?

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Answer:

Actual quantity= 1,080 hours

Explanation:

Giving the following information:

Predetermined overhead application rate= $5.00/hour.

They had 1000 standard hours

Unfavorable variable overhead efficiency variance= $400

To calculate the number of actual hours incurred, we need to use the following formula:

Variable overhead efficiency variance= (Standard Quantity - Actual Quantity)*Standard rate

-400 = (1,000 - AQ)*5

-400 - 5,000 = -5AQ

-5,400/5= -AQ

Actual quantity= 1,080 hours

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