E9-9 Calculating Fixed Manufacturing Overhead Spending. Volume Variances LO 9.S1
ID: 2541606 • Letter: E
Question
E9-9 Calculating Fixed Manufacturing Overhead Spending. Volume Variances LO 9.S1] 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 QuantityStandard Price (Rate) Unit 12 sq ft.$ 0.71 per sq. ft 0.6 hr S 8.52 6.30 0.60 $ 10.50 per hr Variable manufacturing overhead (based on 0.6 hr. $ 1.00 per hr direct labor hours) Fixed manufacturing overhead $700,000 0.70 1,000,000 units) Parker Plastic had the following actual results for the past year: Number of units produced and soild Number of square feet of plastic used Cost of plastic purchased and used Number of labor hours worked Direct labor cost Variable overhead oost Fixed overhead cost 1,100,000 12,650,000 8,728,500 655,000 S 6,615,500 S 720,500 S 688,000 Required: Calculate Parker Plastic's fixed overhead spending and volume variances and ts over- or underapplied fixed overhead. (Indicate the effect of each varlance by selecting "F for favorable/Overapplied and "U" for unfavorable/underapplied.) Fixed Overhead Spending Varianoe Fixed Overhead Volume Variance Over- or Underapplied Fixed OverheadExplanation / Answer
(a) - Fixed Overhead Spending Variance
Formula = Standard Fixed Cost - Actual Fixed cost
Fixex Overhead Spending Variance = ($700000 - $688000) = $12000 F
(B) - Fixed Overhead Volume Variance
Formula = Standard overhead - Fixed Overhead Absorbed
Fixed Overhead Volume Variance=($700000) - (1100000*$0.7)
Fixed Over Head Volume Variance = ($700000 - $770000) = $70000 F
(C) - Under/Over Applied Fixed Overhead
Absorbed Overhead = $770000
Actual Overhead = $688000
Over Applied Fixed Overhead=($770000 - $688000)=$82000 F
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