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 $352,000 - 880,000 units) Standard Quantity 12 sq ft. 0.3 hr. 0.3 hr. Standard Price (Rate) $ 0.65 per sq. ft. $ 10.20 per hr. $ 0.70 per hr. Standard Unit Cost $ 7.80 3.06 0.21 0.40 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 980,000 11,270,000 7,100,100 289,000 2,832,200 231,200 334,000 $ $ $ 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

Solution:

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

= $352,000 - $334,000 = $18,000 F

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead

= (980000*$0.40) - $352,000

= $40,000 F

Over applied fixed overhead = $18,000 F + $40,000 F = $58,000 F