Parker Plastic, Incorporated, manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows: Direct materials (plastic) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead (5326,880 900,000 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 1,020,000 11,300,000 $ 7,910,000 306,000 $3,335,400 $630,000 $ 161,000 Variable Overhead Rate Varance Vanable Overhead Efficiency Varance Vanable Overhead Spending Vanance Standard Quantity 11 square foot 0.25 hour 9.25 hour Standard Price (Rate) $0.73 per square foot $10.49 per hour $2.00 per hour Required: Calculate Parker Plastic's variable overhead rate and efficiency variances and its over- or underapplied variable overhead. Note: Do not round intermediate calculations. Indicate the effect of each variance by selecting "P for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance). Standard Unit Cost $8.01 2.60 0.50 0.36
Parker Plastic, Incorporated, manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows: Direct materials (plastic) Direct labor Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead (5326,880 900,000 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 1,020,000 11,300,000 $ 7,910,000 306,000 $3,335,400 $630,000 $ 161,000 Variable Overhead Rate Varance Vanable Overhead Efficiency Varance Vanable Overhead Spending Vanance Standard Quantity 11 square foot 0.25 hour 9.25 hour Standard Price (Rate) $0.73 per square foot $10.49 per hour $2.00 per hour Required: Calculate Parker Plastic's variable overhead rate and efficiency variances and its over- or underapplied variable overhead. Note: Do not round intermediate calculations. Indicate the effect of each variance by selecting "P for favorable, "U" for unfavorable, and "None" for no effect (.e., zero variance). Standard Unit Cost $8.01 2.60 0.50 0.36
Chapter1: Financial Statements And Business Decisions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Parker Plastic, Incorporated, manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year
follows:
Direct materials (plastic)
Direct labor
Variable manufacturing overhead (based on direct laber hours)
Fixed manufacturing overhead ($326,880 908,000 units)
Parker Plastic had the following actual results for the past year:
Sumber of units produced and sold
umber 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
1,020,000
11,300,000
$7,910,000
Variable Overhead Rate Variance
Vanable Overhead Efficiency Variance
Variable Overhead Spending Varance
306,000
$3,335,400
$630,000
$ 163,000
Standard Quantity
11 square foot
0.25 hour
0.25 hour
Standard Price (Rate)
$0.73 per square foot
$10.40 per hour.
$2.00 per hour
Required:
Calculate Parker Plastic's variable overhead rate and efficiency variances and its over- or underapplied variable overhead.
Note: Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for
unfavorable, and "None" for no effect (i.e., zero variance).
Standard Unit
Cost
$8.03
2.60
0.50
0.16
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