Parker Plastic, Inc., manufactures plastic mats to use with rolling office chair
ID: 2536104 • 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. $ 0.92 per sq. ft. $ 8.28 Direct labor 0.25 hr. $ 10.40 per hr. 2.60 Variable manufacturing overhead (based on direct labor hours) 0.25 hr. $ 1.60 per hr. 0.40 Fixed manufacturing overhead $289,280 ÷ 904,000 units) 0.32 Parker Plastic had the following actual results for the past year: Number of units produced and sold 1,200,000 Number of square feet of plastic used 11,100,000 Cost of plastic purchased and used $ 9,990,000 Number of labor hours worked 302,000 Direct labor cost $ 3,110,600 Variable overhead cost $ 496,000 Fixed overhead cost $ 359,000 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.)
Explanation / Answer
Standard Hour Standard Rate Standard Cost 1 Variable OH Rate Variance: Variable M.OH 0.25 1.60 0.40 (Standard Price-Actual Price)* Actual Hours (1.60-1.6424)*302000 Actual Units Produced 1200000 -12804.8 U Standard Cost for Actual Production: Standard Hour Standard Rate Standard Cost 2 Variable OH Efficiency Variance: Variable M.OH 3,00,000 1.60 4,80,000 (Standard Hours-Actual Hours)* Standard Price (300000-302000)*1.60 Actual Cost for Actual Production: -3200 U Actual Hour Actual Rate Actual Cost Variable M.OH 3,02,000 1.6424 4,96,000 3 Applied Overhead 4,80,000 (Cost/Hour) Actual Overhead 4,96,000 Underapplied Overhead by 16,000