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)	10	sq ft.	$	0.82	per sq. ft.	$	8.20
Direct labor	0.25	hr.	$	10.20	per hr.		2.55
Variable manufacturing overhead (based on direct labor hours)	0.25	hr.	$	1.40	per hr.		0.35
Fixed manufacturing overhead $270,600 ÷ 902,000 units)							0.30

Parker Plastic had the following actual results for the past year:

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

Required:
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/Overapplied and "U" for Unfavorable/Underapplied.)

Variable overhead rate variance

Variable overhead efficiency variance

Variable overhead spending variance

Answer 1

Voh rate variance = (SR-AR) *AH

= (1.40-400,000/300,000)*300,000

= 20,000 F

Voh efficiency variance = (SH-AH) *SR

= (1,020,000*0.25 - 300,000)*1.40

= 63,000 U

Voh spending variance = 20,000 F + 63,000 U

= 43,000 U