E9-6 Calculating Direct Materials Variances Lo 9-3] Parker Plastic, Inc., manufa

Question

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: 1.02 per sq, ft 2.60 por hr 8.16 3.33 0.78 8 sq ft. 0.3 hr. Direct labor Variable manufacturing overhead (based on 0.3 hr $ 11.10 per hr. direct labor hours) Fxed overhead $383,880 . 914,000 units) 0.42 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 plasto purchased and used Number of labor hours worked Direct labor cost Variable overhead cost Fixed overhead cost ,060.000 11,000,000 11,800,.000 312,000 3,681,600 800,000 S 369,000 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.) Direct Matorial Price Variance Direct Material Quantity Variance

Explanation / Answer

E9-6 Actual output: 1080,000 Standard material quantity required per unit of output: 8 sq. ft Standard quantityt aloowed (1080,000*8): 8640,000 sq. ft Standard price per sq. ft: $ 1.02 per sq ft. Actual quantity used: 11600,000 sq. ft Actual price per sq. ft (11600,000 /11600,000): $ 1.00 per sq.ft Direct material price variance: Actual quantity (Std price per sq. ft - Actual price sq. ft) (11600,000 (1.02 -1.00)) : $232,000 favorable Direct material Quantity variance: Sd price per sq. ft (Standard quantity -Actual quantity) (1.02 (8640,000 - 11600,000) = $3019,200 Unfavorable E-9-7 Actual output: 1200,000 Std hours allowed per unit of output: 0.25 hour Standard hours allowed for actual output: (1200,000*.025): 300,000 hours Std rate per hour: $10.40 per hour Actual labour hours worked: 302,000 Actual rate per hour (3110600 /302,000) = $10.30 per hour Labour rate variance: Actual hours worked (Sstd rate per hour - actual rate per hour) (302,000 (10.40 -10.30 )) = $30,200 favorable Labour efficiency variance = Std rate per hour (Standard hourrs- Actual hours) (10.40 (300,000-302,000) ) = $ 20,800 unfavorable E 9-8 Actual output: 1020,000 units Std hours allowed per unit of output: 0.25 hour Std hours allowed (1020,000*.025) = 255,000 hours Std variable OH rate per hour: $2.00 per hour Actual Hours worked: 306,000 Actual variable overheads rate per houur (630,000 /306000): $ 2.059 per hour Variable OH rate variance: Actual horus worked (Std variable OH rate per hour - Actual variable OH rate per hour) (306,000 (2.00 -2.059)): $ 18,000 unfavorable Variable OH efficiency variance: Std rate per hour (Std hours-Actual hours) (2.00 (255000 -306000)) =$102,000 unfavorable Variable overheads spending variance: Std variable OH allowwed for actual ouput - Actual variable oh (255000 hours *$2.00) - 630000 = $120,000 unfavorable (under-applied)

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