Parker Plastic, Inc., manufactures plastic mats to use with rolling office chair
ID: 2462440 • Letter: P
Question
Parker Plastic, Inc., manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows:
Standard
Quantity
Standard Price
(Rate)
Standard
Unit Cost
Direct materials (plastic)
9
sq ft.
$
1.30
per sq. ft.
$
11.70
Direct labor
0.3
hr.
$
13.50
per hr.
4.05
Variable manufacturing overhead
(based on direct labor hours)
0.3
hr.
$
1.30
per hr.
0.39
Fixed manufacturing overhead
($619,080 ÷ 938,000 units)
0.66
Parker Plastic had the following actual results for the past year:
Number of units produced and sold
1,000,000
Number of square feet of plastic used
12,800,000
Cost of plastic purchased and used
$
15,360,000
Number of labor hours worked
336,000
Direct labor cost
$
4,200,000
Variable overhead cost
$
1,700,000
Fixed overhead cost
$
393,000
Required:
Calculate Parker Plastic’s variable overhead rate and efficiency variances and its over- or underapplied variable overhead. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.)
Variable Overhead Rate Variance
$
Variable Overhead Efficiency Variance
$
Variable Overhead Spending Variance
$
Comment
Standard
Quantity
Standard Price
(Rate)
Standard
Unit Cost
Direct materials (plastic)
9
sq ft.
$
1.30
per sq. ft.
$
11.70
Direct labor
0.3
hr.
$
13.50
per hr.
4.05
Variable manufacturing overhead
(based on direct labor hours)
0.3
hr.
$
1.30
per hr.
0.39
Fixed manufacturing overhead
($619,080 ÷ 938,000 units)
0.66
Explanation / Answer
Variable Overhead Rate Variance Actual Variable Overhead 17,00,000 Less AH*SR =336000*1.30 436800 Variable Overhead Rate Variance 12,63,200 Unfavorable Variable Overhead Efficiency Variance AQ*SH* SR=1000000*0.3*1.3 390000 Less AH*SR =336000*1.30 436800 Variable Overhead Efficiency Variance 46800 Unfavorable Variable Overhead Spending Variance AQ*SH* SR=1000000*0.3*1.3 390000 Actual Variable Overhead 17,00,000 Overhead Spending Variance 13,10,000 underapplied