Question

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 $700,000 = 1,000,000 units) Standard Quantity 12 sq ft. 0.6 hr. 0.6 hr. Standard Price (Rate) $ 0.71 per sq. ft. $ 10.50 per hr. $ 1.00 per hr. Standard Unit Cost $ 8.52 6.30 0.60 0.70 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 1,100,000 12,650,000 8,728,500 655,000 6,615,500 720,500 688,000 $ $ $ 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 Overhead

Answer 1

Answer:-

Calculation fixed overhead spending variance is as follows:-

Fixed overhead spending variance=Budgeted fixed overheads - Actual fixed overheads

=$700000-$688000=$12000(F).

Calculation fixed overhead volume variance is as follows:-

Fixed overhead volume variance=Applied fixed overheads - Budgeted fixed overheads

=$770000-$688000=$82000(F).(refer below for applied fixed overheads)

Calculation under/over applied fixed overhead is as follows:-

Applied fixed overheads=standard fixed overhead per unit*Actual units produced

=$0.70*1100000=$770000(over applied).

Particulars	Amount($)	Favorable/Adverse
Fixed overhead spending variance	12000	Favorable
Fixed overhead volume variance	82000	Favorable
Over-or Under applied Fixed overhead	770000	Over applied