Parker Plastic, Inc., manufactures plastic mats to use with rolling office chair

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) 12 sq ft. $ 1.45 per sq. ft. $ 17.40
Direct labor 0.3 hr. $ 11.90 per hr. 3.57
Variable manufacturing overhead (based on direct labor hours) 0.3 hr. $ 2.30 per hr. 0.69
Fixed manufacturing overhead $461,000 ÷ 922,000 units) 0.50

Parker Plastic had the following actual results for the past year:

Number of units produced and sold 1,160,000
Number of square feet of plastic used 12,000,000
Cost of plastic purchased and used $ 16,800,000
Number of labor hours worked 320,000
Direct labor cost $ 3,744,000
Variable overhead cost $ 1,100,000
Fixed overhead cost $ 377,000

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.)

Parker Plastic, Inc., manufactures plastic mats to use with rolling ofice chairs. Its standard cost information for last year follows: Standard QuantityStandard Price (Rate) 12 sq ft 145 per sq ft 03 hr Standard Unit Cnst 3 57 0.69 0.50 Direct materials (plastic) Direct lahor Variable manufacturing overhead (based on $17 40 5 11.90 per hr $ 2.30 per hr 0.3 hr direct labor hours) Fixed manufacturing overhead $461,000- 922,000 units) Parker Plastic had the following actual results for the past year: Number of units preduced and sold Number of square feet of plastic used Cost of plastic purchased and used Number of labor hours worked Direcl labor cost Variable overhead cost Fixed owerhead cost 1,160,000 12,000,000 S 16,800,000 320,000 S 3,741,000 S 1,100,000 S 377,000 Required: Calculate Parker Plastic's variable overhead rate and efficiency varianoes and its over- or underapplied variable overhead. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for FavorablelOverapplied and"U" for UnfavorablelUnderapplied.) Vanable Overmead Rate Variance Variable Overhead Efficiency Variance Variable Overhead Spending Vaniance

Explanation / Answer

Variable overhead rate variance = (2.30*320000-1100000) = 364000 U

Variable overhead efficiency variance = (1160000*0.30-320000)*2.30 = 64400 F

Variable overhead spending variance = (1160000*.69-1100000) = 299600 U

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