Question

Direct Materials Variances LO10–1 Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet for the North American market, requires a special plastic. During the quarter ending June 30, the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000. According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram.

1.	Number of helmets................................................
	Number of kilograms of plastic per helmet.............	×   ___
	Standard Kilograms allowed...................................
	Standard cost per Kilogram...................................	× $____
	Total standard cost................................................	$______
	Actual cost incurred...............................................	$______
	Standard cost above..............................................	______
	Spending variance.................................................	$    ___
__

2.

Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP)		Actual Quantity of Input, at Standard Price (AQ × SP)		Actual Quantity of Input, at Actual Price (AQ × AP)
______ kilograms × $____ per Kilogram = $______		______ kilograms × $____ per Kilogram = $______		$_______
	Materials quantity variance = $_____ __		Materials price variance = $_____ __
	Spending variance = $___ __

     Alternatively, the variances can be computed using the formulas:

         Materials quantity variance = SP (AQ – SQ)

            = $ _____per Kilogram (_______ Kilogram – _____ Kilogram)

            = $______ __

         Materials price variance = AQ (AP – SP)

            = _____ Kilogram ($____ per Kilogram* – $___ per Kilogram)

            = $____ __

            *$171,000 / 22,500 Kilogram = $____ per Kilogram.

Answer 1

• Requirement 1

A	Number of helmets................................................	35,000
B	Number of kilograms of plastic per helmet.............	0.6
C = A x B	Standard Kilograms allowed...................................	21,000
D	Standard cost per Kilogram...................................	$8
E = C x D	Total standard cost................................................	$168,000
F	Actual cost incurred...............................................	$171,000
G = E	Standard cost above..............................................	$168,000
H = F - G	Spending variance.................................................	$3,000 Unfavourable

• Requirement 2

Standard Quantity Allowed for Actual Output, at Standard Price (SQ × SP)		Actual Quantity of Input, at Standard Price (AQ × SP)		Actual Quantity of Input, at Actual Price (AQ × AP)
21000 kilograms × $ 8 per Kilogram = $168,000		22500 kilograms × $ 8 per Kilogram = $ 180,000		22500 kg x $ 7.6 = 171000
	Materials quantity variance = $12000 Unfavourable		Materials price variance = $9000 Favourable
	Spending variance = $3000 Unfavourable