Question

E9-9 (Algo) 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: points Skipoed Standard Quantity 12 sq ft. 0.3 hr. 0.3 hr. Direct materiale (plastic) Direct labor Variable manufacturing overhead based on direct labor hours) Fixed manufacturing overhead (5661.000 - 922,000 units) Standard Price Rate) $1.45 per sq. ft. $11.90 per hr. $ 2.30 per hr. Standard Unit Cont $17.40 0.50 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 plastie purchased and used Number of labor hours worked Direct Labor cost Variable overhead coat Fixed overhead coat 1.160,000 12,000,000 $16.800.000 320,000 $ 3,744,000 S 1.100.000 S 377.000 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, and "None" for no effectie, zero variance).) Direct Labor Rate Varance Direct Labor Emiciency Variance

Answer 1

Direct Labor Rate Variance = Actual Hours ( Actual rate - Standard rate)

= 320,000 ( 11.7 - 11.9) = (64,000) Favourable

Actual hours = 320,000

Actual Rate = Direct labor cost / Direct labor hours = 3,744,000 / 320,000 = 11.7

Direct Labor Efficiency Variance = Standard rate ( Actual hours - Standard hours based on actual output )

= 11.9 ( 320,000 - 384,000 ) = (333,200) Favourable

Actual hours= 320,000

Standard hours based on actual output = 1,160,000 x 0.3 = 384,000