Question

1)

Parker Plastic, Inc., manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows: Direct materials (plastic) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead $422,280 + 918, eee units) Standard Quantity 10 sq ft. 0.3 hr. 0.3 hr. Standard Standard Price (Rate) Unit Cost $ 1.13 per sq. ft. $11.30 $11.20 per hr. 3.36 $ 3.00 per hr. 0.90 0.46 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 1,120,000 11,800,000 $ 14,160,000 316,000 3,634,000 960,000 373,000

2)

Answer 1

Solution for -1

Calculation of Variable OH rate variance

= (Standard Variable OH per hour - actual variable OH per hour) × Actual hours used

= ($3/hour - $3.038/hour) × 316000 Hours= $12000 U F

* Actual Cost /Hour= $960000/316000=$3.038/Hour

Calculation of Variale OH efficiency variance:

= (standard hours required for actual production - actual hours used) × standard Rate

= (0.3Hour × 1120000 - 316000) × $3 = $60000 F

Calculation of Under Applied / Overapplied Overhead

Applied Variable Overhead ( 1120000X 0.30 HorX $3)=$1008000

Actual overhead:- $960000

OverApplied Variable Overhead= 1008000-960000=$48000

Variable Overhead Spending Variance= Applied Variable Overhead- Actual Overhead

$48000 Favourable

Solution-2

Fixed Overhead Rate=Budgeted Fixed Overhead/Practical Capacity

$572700/83000=$6.9 Per Unit

Fixed Overhead Spending Variance= Budgeeted Fixxed Overhead- Actual Overhead

=572700)- 550000=$22700 favourable

Expected (planned) capacity variance:

=Fixed OH rate x (Budgeted volume - Practical capacity)

=6.9 x (73,000-83,000)

=$69,000Unfavorable

Unexpected (unplanned) capacity variance:

=FOH rate x (Actual volume-Budgeted volume)

=6.9 x (78,000-73,000)

=34,500(Favorable)

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