tpx 110% *IQ, Search E9-6 Calculating Direct Materials Variances [LO 9-3] Parker
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tpx 110% *IQ, Search E9-6 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 Sta Quantily Standard Price (Rate) Unt Direct materials (plastic) Direct labor 13 sq ft. 0.70 per sq. S 12 20 per hr Variable manufacturing overhead (based on 025 hr 1.40 per hr. $ 9.10 0.25 hr 3.05 0.35 0.54 direct labor hours) Fixed manufacturing overhead $500,040 926,000 units) Parker Plastic had the following actual resulits for the past year 1,200,000 2,200,000 $ 7,320,000 324,000 3,855,600 S 1,300,000 $ 381,000 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 Required Calculate Parker Plastic's direct materials price and quantity variances. (Do not round intermediate calculations. Indicate the effect of each variance by selectingor favorable, "U" for unfavorable.) Direct Material Price Variance Direct Material Quantity Variance /11/2018Explanation / Answer
Standard quantity = 13 sq. ft.
Standard quantity for actual quantity produced = 1,200,000 x 13 = 15,600,000 sq. ft.
Standard rate = $0.70
Actual quantity = 12,200,000
Actual rate = $7,320,000/12,200,000 = $0.60
Now calculate the variances as follows:
Direct material price variance
= (Actual rate - Standard rate) x Actual quantity
= ($0.60 - $0.70) x 12,200,000
= 1,220,000 Unfavorable
Direct material quantity variance
= (Actual quantity - Standard quantity for actual production) x Standard price
= (12,200,000 - 15,600,000) x $0.70
= $2,380,000 Favorable
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