Atrex Company determined that its variable overhead spending variance was $10 000 unfavourable for the year. Actual variable overhead was $100 000 for the year. Variable overhead is applied based on machine hours. The standard rate per machine hour was $9. The standard quantity of machine hours allowed for good output was 9000. What was the actual quantity of machine hours used?
A) 12 222
B) 11 000
C) 10 000
D) 9000

Question

Quizplus · Accepted Answer

The formula for calculating the variable overhead spending variance is:

Variable Overhead Spending Variance = Actual Variable Overhead - (Standard Variable Overhead Rate x Actual Hours)

We are given the following information:

Variable Overhead Spending Variance = $10,000 (unfavourable)
Actual Variable Overhead = $100,000
Standard Variable Overhead Rate = $9 per machine hour
Standard Hours Allowed = 9,000 machine hours

Substituting the values into the formula, we get:

$10,000 = $100,000 - ($9 x Actual Hours)
$9 x Actual Hours = $90,000
Actual Hours = 10,000 machine hours

Therefore, the actual quantity of machine hours used was 10,000. The correct answer choice is C (10,000).

Atrex Company Determined That Its Variable Overhead Spending Variance Was