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.)

Answer 1

	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