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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 Overhead

Explanation / 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