Parker Plastic, Incorporated, manufactures plastic mats to use with rolling office chairs. Its standard cost information for last year follows: Standard QuantityStandard Price (Rate)Standard Unit CostDirect materials (plastic)11 square foot$0.73 per square foot$8.03 Direct labor0.25 hour$10.40 per hour2.60 Variable manufacturing overhead (based on direct labor hours)0.25 hour$2.00 per hour0.50 Fixed manufacturing overhead ($326,880 ÷ 908,000 units) 0.36 Parker Plastic had the following actual results for the past year:Number of units produced and sold1,020,000Number of square feet of plastic used 11,300,000Cost of plastic purchased and used$ 7,910,000Number of labor hours worked306,000Direct labor cost$ 3,335,400Variable overhead cost$ 630,000Fixed overhead cost$ 363,000 Calculate Parker Plastic’s direct materials price and quantity variances

DIRECT MATERIAL PRICE VARIANCE Direct Materials Price Variance is the difference between the actual…

Answered: Parker Plastic, Incorporated,…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter9: Standard Costing: A Functional-based Control Approach

Section: Chapter Questions

Problem 30P: Algers Company produces dry fertilizer. At the beginning of the year, Algers had the following...

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Parker Plastic, Incorporated, 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)	11 square foot	$0.73 per square foot	$8.03
Direct labor	0.25 hour	$10.40 per hour	2.60
Variable manufacturing overhead (based on direct labor hours)	0.25 hour	$2.00 per hour	0.50
Fixed manufacturing overhead ($326,880 ÷ 908,000 units)			0.36

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	11,300,000
Cost of plastic purchased and used	$ 7,910,000
Number of labor hours worked	306,000
Direct labor cost	$ 3,335,400
Variable overhead cost	$ 630,000
Fixed overhead cost	$ 363,000

Calculate Parker Plastic’s direct materials price and quantity variances

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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