Parker Plastic, Inc., manufactures plastic mats to use with rolling office chair
ID: 2580755 • Letter: P
Question
Parker Plastic, Inc., manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows Standard QuantityStandard Price (Rate) 12 sq ft. $ 0.63 per sq. ft. 0.2 hr. Standard Unit Cost 2.02 0.12 0.30 Direct materials (plastic) S 7.56 Direct labor Variable manufacturing overhead (based on0.2 ht Fixed manufacturing overhead $252,000 $ 10.10 per hr $ 0.60 per hr direct labor hours) 840,000 units) Parker Plastic had the following actual results for the past year: Number of units produced and sold Number of square feet of plastic used Cost of plastic purchased and used Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost 940,000 10,810,000 5 6,594,100 183,000 S 1,775,100 128,100 5 232,000 Required Calculate Parker Plastic's fixed overhead spending and volume variances and its over- or underapplied fixed overhead. (Indicate the effect of each variance by selecting "F" for favorable/Overapplied and "U" for unfavorable/underapplied.) Fixed Overhead Spending Variance Fixed Overhead Volume Variance Over- or Underapplied Fixed OverheadExplanation / Answer
Fixed Overhead Spending Variance = Budgeted Fixed Overhead - Actual Fixed Overhead Fixed Overhead Spending Variance = $252,000 - $232,000 Fixed Overhead Spending Variance = $20,000 (F) Fixed Overhead Volume Variance = Absorbed Fixed Overhead - Budgeted Fixed Overheads Fixed Overhead Volume Variance = $0.30 X 940,000 Units - $0.30 X 840,000 Fixed Overhead Volume Variance = $30,000 (F) Calculation of Over or Underapplied Overhead Applied Fixed Overhead - 940,000 Units X $0.30 282,000 Actual Fixed Overhead 232,000 Overapplied Overhead 50,000