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)	10	sq ft.	$	0.82	per sq. ft.	$	8.20
Direct labor	0.25	hr.	$	10.20	per hr.		2.55
Variable manufacturing overhead (based on direct labor hours)	0.25	hr.	$	1.40	per hr.		0.35
Fixed manufacturing overhead $270,600 ÷ 902,000 units)							0.30

Parker Plastic had the following actual results for the past year:

Number of units produced and sold		1,020,000
Number of square feet of plastic used		11,000,000
Cost of plastic purchased and used	$	8,800,000
Number of labor hours worked		300,000
Direct labor cost	$	3,000,000
Variable overhead cost	$	400,000
Fixed overhead cost	$	357,000

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.)

Answer 1

• Direct material price variance

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                0.82	-	$                       0.80	)	x	11000000
	220000
	Variance		$          220,000.00			Favourable-F

• Direct material quantity variance

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	10200000	-	11000000	)	x	$                           0.82
	-656000
	Variance		$          656,000.00			Unfavourable-U