Question

Parker Plastic, Inc., manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows: Standard Standard Unit Cost 8.03 2.60 Quantity 11 sq ft 0.25 hr Standard Price (Rate) $ 0.73 per sq. ft $10.40 per hr. Direct materials (plastic) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead $326,880 908,000 units) $ 2.00 per hr. 0.25 hr. 0.50 0.36 Parker Plastic had the following actual results for the past year: 1,020,000 11,300,000 7,910,000 306,000 3,335,400 $ 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 630,000 363,000 Fixed overhead cost Required: Calculate Parker Plastic's direct labor rate and efficiency variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.) Direct Labor Rate Variance Direct Labor Efficiency Variance

Answer 1

Parker Plastic Inc.
Direct Labour Rate Variance = Actual Hours x (Standard Rate - Actual Rate)
		= (306000 x 10.40 ) - 3335400
		=153000 U
Direct Labor Efficiency Variance = Standard Rate × (Standard Hours – Actual Hours)
		=	10.40 x (( 1020000 x 0.25 ) - 306000 )
		=	530400 U
Total Direct Labor Spending Variance = $153,000 U + $530,400 U = $683,400 U