Question

E9-8 (Algo) Calculating Direct Materials Variances [LO 9-3] 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 Variable manufacturing overhead (based on direct labor hours) Fixed manufacturing overhead $599,040 + 936,000 units) Standard Standard Price Quantity (Rate) 8 sq ft. $ 1.20 per sq. ft. 0.3 hr. $13.30 per hr. 0.3 hr. $ 2.40 per hr. Standard Unit Cost $ 9.60 3.99 0.72 0.64 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 1,300,000 12,700,000 $ 13,970,000 334,000 $ 4,141,600 $ 1,620,000 $ 391,000 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, and "None" for no effect (i.e., zero variance).) Direct Material Price Variance Direct Material Quantity Variance $ $ 127,000 276,000 F U

Answer 1

Correct answer--------

Material Price Variance	$   1,270,000.00	Favourable-F
Material quantity variance	$   2,760,000.00	Unfavourable-U

Working

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    1.20	-	$                     1.10	)	x	12700000
	1270000
	Variance		$     1,270,000.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	10400000	-	12700000	)	x	$              1.20
	-2760000
	Variance		$     2,760,000.00			Unfavourable-U

.

Standard DATA for		1300000	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 8 sq. ft x 1300000 Units)=10400000 sq. ft	$                   1.20	$    12,480,000.00

.

Actual DATA for		1300000	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	12700000	$       1.10	$ 13,970,000.00