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)	8	sq ft.	$	0.63	per sq. ft.	$	5.04
Direct labor	0.26	hr.	$	10.50	per hr.		2.73
Variable manufacturing overhead (based on direct labor hours)	0.26	hr.	$	1.50	per hr.		0.39
Fixed manufacturing overhead $308,040 ÷ 906,000 units)							0.34

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

Number of units produced and sold		1,220,000
Number of square feet of plastic used		11,200,000
Cost of plastic purchased and used	$	6,720,000
Number of labor hours worked		305,000
Direct labor cost	$	3,233,000
Variable overhead cost	$	540,000
Fixed overhead cost	$	361,000

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.)

Answer 1

Materials Price Variance = (SP-AP) *AQ

= (0.63 - 6,720,000/11,200,000)*11,200,000

= 336,000 F

Materials Quantity Variance = (SQ-AQ) *SP

= (1,220,000*8 --11,200,00)*0.63

= 907,200 U