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

Question

E9-8 Calculating Variable Overhead Variances [LO 9-5] Parker Plastic, Inc., manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows: Standard Unit Cost 3.27 0.72 0.40 Standard QuantityStandard Price (Rate) 13 sq ft. 0.93 per sq. ft Direct materials (plastic) Direct labor $12.09 0.3 hr. 0.3 hr S 10.90 per hr s 2.40 per hr. overhead (based on direct labor hours) Fixed manufacturing overhead $364,800+ 912,000 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 1,060,000 11,500,000 $10,350,000 310,000 $ 3,565,000 $ 780,000 $367,000 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

Explanation / Answer

Variable overhead rate variance = 780000-(310000*2.4)= 36000 U Variable overhead efficiency variance = 2.4*(310000-1060000*0.3)= 19200 F Variable overhead spending variance = 780000-(1060000*0.72)= 16800 U

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