E9-8 Calculating Variable Overhead Variances [LO 9-5] Parker Plaste, Inc.. manuf

Question

E9-8 Calculating Variable Overhead Variances [LO 9-5] Parker Plaste, Inc.. manufactes plastic mats to use with roling ofice chars. Its standard st rhrmation for last year folows Standard Price (Rate Un Direct materials (plastic) 025 Direct labor Variable manufacturing overhead (based on2 Fioxed manufacturing overhead $270,600 S 10.20 per ht 1.40 per h 035 0.30 902,000 unts) Parker Plasic had the following actual results for the past year 1020.000 11,000.000 Number of units produced and sold Number of square foet of plastic used Cost of plastic purchased and used Number of labor hours worked Direct labor cost 8,800,000 300,000 3,000,000 400,000 Fixed o sead cost Required: Calculate Parker Plasbc's variabile overhead rate and officiency variances a the efflect of each variance by selecting "F" for FavorablelOverapplied and "U" for Unfavorable Under and its over- or under applied variable overhead (Do not round intermediate calculations. Indicate pplied) Variable Overhead Rate Variance Variable Overhead Eficiency Variance Variable Overhead Spending Variance 9 6 7 2

Explanation / Answer

Actual output: 1020,000 units Std hour allowed per unit of output: 0.25 hour Std hours allowed: (1020,000*0.25) = 255,000 hours Std rate per hour: $ 1.40 per hour Actual hours worked: 300,000 hours Actual rate per hour (400,000/300,000): $ 1.33 per hour Variable oOH rate variance: Actual hours worked (Std rate per hour - Actual rate per hour) 300,000 hours ($ 1.40 -1.33 ) = $20,000 favorable variable effciency variance: Std rate per hour (Std hours allowed- Actual houors worked) 1.40 (255,000 - 300,000) = $63,000 aadverse Variable spending variance = Std variable overheads cost allowed - Actual variable overheads (255,000 hours *1.40 per hour ) - $400,000 = $ 43,000 adverse Variable overheads rate variancec $20,000 Fav Variable overheads efficiency $63,000 Unfav VariableSpending variance $43,000 UNfav

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