Parker Plastic, Inc., manufactures plastic mats to use with rolling office chair
ID: 2536101 • Letter: P
Question
Parker Plastic, Inc., manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows: Standard Quantity Standard Price (Rate) Standard Unit Cost Direct materials (plastic) 15 sq ft. $ 0.90 per sq. ft. $ 13.50 Direct labor 0.25 hr. $ 12.60 per hr. 3.15 Variable manufacturing overhead (based on direct labor hours) 0.25 hr. $ 1.80 per hr. 0.45 Fixed manufacturing overhead $539,400 ÷ 930,000 units) 0.58 Parker Plastic had the following actual results for the past year: Number of units produced and sold 1,240,000 Number of square feet of plastic used 12,400,000 Cost of plastic purchased and used $ 9,920,000 Number of labor hours worked 328,000 Direct labor cost $ 3,968,800 Variable overhead cost $ 1,350,000 Fixed overhead cost $ 385,000 Required: Calculate Parker Plastic’s direct materials price and quantity variances. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable.)
Explanation / Answer
Standard Qty Standard Rate Standard Cost 1 Material Price Variance: Direct Material 15.00 0.90 13.50 (Standard Price-Actual Price)* Actual Quantity (0.90-0.80)*12400000 Actual Units Produced 1240000 1240000 F Standard Cost for Actual Production: Standard Qty Standard Rate Standard Cost 2 Material Usage Variance: Direct Material 1,86,00,000 0.90 1,67,40,000 (Standard Qty-Actual Qty)* Standard Price (18600000-12400000)*0.90 Actual Cost for Actual Production: 5580000 F Actual Qty Actual Rate Actual Cost Direct Material 1,24,00,000 0.80 99,20,000 (Cost/Qty)