3. 4.00 points E9-7 Calculating Direct Labor Variances [LO 9-4] Parker Plastic,
ID: 2541570 • Letter: 3
Question
3. 4.00 points 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: Standard Unit Cost QuantityStandard Price (Rate) 12 sq ft.1.10 per sq. ft. S 13.20 Direct materials (plastic) Direct labor 0.25 hr 0.25 hr 13.20 per hr 2.20 per hr Variable manufacturing overhead (based on 0.55 direct labor hours) Fixed manufacturing overhead $579,080 + 0.62 934,000 units) 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 plastic purchased and used Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost 1,280,000 12,600,000 $12,600,000 332,000 $4,083,600 $ 1,589,000 $389,000 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.) Direct Labor Rate Variance Direct Labor Efficiency VarianceExplanation / Answer
Direct labor Rate variance = (standard rate - actual rate) * actual Hours
= [13.2 – (4083600/332000)] *
= (13.2 – 12.3) * 332000
= 0.9 * 332000
= 298800 Favourable
Labor Efficiency variance = (Standard hours for actual production - Actual hours) *Standard rate
=[(1280000* .25) – 332000] * 13.2
= (320000 – 332000) * 13.2
= -12000* 13.2
= - 158400 Unfavourable
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