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:

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

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.)

Standard Quantity Standard Price (Rate) Standard Unit Cost Direct materials (plastic) 12 sq ft. $ 0.83 per sq. ft. $ 9.96 Direct labor 0.3 hr. $ 10.50 per hr. 3.15 Variable manufacturing overhead (based on direct labor hours) 0.3 hr. $ 2.20 per hr. 0.66 Fixed manufacturing overhead $345,800 ÷ 910,000 units) 0.38

Explanation / Answer

variable overhead rate variance=689000-(308000*2.2)= $11400 U Variable overhead efficiency variance=2.2*(308000-1040000*0.3)= $8800 F Underapplied variable overhead = 11400-8800 = $2600 U

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