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	Standard Unit Cost
Direct materials (Plastic)	10 Sq Ft	0.82 per square feet	8.20
Direct Labor	0.25 hr	10.20 per hours	2.55
VMOH	0.25 hr	1.40 per hour	0.35

Fixed MOH 0.30

Number of Units Produced and Sold	1,020,000
Number of square feet of Plastic used	11,000,000
Cost of Plastic Purchased and used	8,800,000
Number of Labor Hours Worked	300,000
Direct Labor Cost	3,000,000
Variable overhead Cost	400,000
Fixed Overhead Cost	357,000

1. Calculate Parker Plastic’s variable overhead rate and efficiency variances and its over- or underapplied variable overhead. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

Answer 1

Variable overhead rate variance	20000	F	=400000-(300000*1.4)
Variable overhead efficiency variance	63000	U	=1.4*(300000-1020000*0.25)
Variable overhead spending variance	43000	U	=400000-(1020000*0.35)