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) 12 sq ft. $ 1.00 per sq. ft. $ 12.00 Direct labor 0.25 hr. $ 12.80 per hr. 3.20 Variable manufacturing overhead (based on direct labor hours) 0.25 hr. $ 2.00 per hr. 0.50 Fixed manufacturing overhead $559,200 ÷ 932,000 units) 0.60 Parker Plastic had the following actual results for the past year: Number of units produced and sold 1,260,000 Number of square feet of plastic used 12,500,000 Cost of plastic purchased and used $ 11,250,000 Number of labor hours worked 330,000 Direct labor cost $ 4,026,000 Variable overhead cost $ 1,480,000 Fixed overhead cost $ 387,000 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.)

Answer 1

ANSWER

Std DLH allowed (1260000*0.25)		315000
Std Rate per DLH		12.8
Actual DLH		330000
Actuall Rate (4026000/330000)		12.2
Labor rate variance = Actual hours (Std rate - Actual rate)
		330000 (12.80-12.20) = 198000 Fav
Labor effciency variance= Std rate (Std hours - Actual hours)
		12.80 (315000-330000) = 192000 Unfav

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