Question

E9-7 Calculating Direct Labor Variances [LO 9-4] 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 $270,600 + 902,000 units) Standard Quantity 10 sq ft. 0.25 hr. 0.25 hr. Standard Price (Rate) $ 0.82 per sq. ft. $ 10.20 per hr. $ 1.40 per hr. Standard Unit Cost $ 8.20 2.55 0.35 0.30 Parker Plastic had the following actual results for the past year: EA 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 1,020,000 11,000,000 8,800,000 300,000 3,000,000 400,000 357,000 EAEAA 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

Labor rate variance = (SR-AR) *AH

= (10.20 - 3,000,000/300,000) * 300,000

= 60,000 F

Labor efficiency variance = (SH-AH) *SR

= (1,020,000*0.25 - 300,000) * 10.20

= 459,000 U

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