Question

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 3,200 helmets, using 2,336 kilograms of plastic. The plastic cost the company $15,418.

According to the standard cost card, each helmet should require 0.65 kilograms of plastic, at a cost of $7.00 per kilogram.

Required:

1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,200 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,200 helmets?

3. What is the materials spending variance?

4. What is the materials price variance and the materials quantity variance?

Answer 1

• Answer 1

SQ of plastic = Actual units produced x 0.65 kgs

= 3200 helmets x 0.65 kgs

= 2,080 kgs = SQ Allowed = Answer

• Answer 2

Standard material cost allowed = SQ allowed x $ 7 per kg

= 2080 x 7

= $ 14,560 = Answer

• Answer 3

Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$             14,560.00	-	$            15,418.00	)
	-858
	Variance		$                  858.00			Unfavourable-U

• Answer 4

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        7.00	-	$                       6.60	)	x	2336
	934
	Variance		$                  934.00			Favourable-F

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	2080	-	2336	)	x	$                           7.00
	-1792
	Variance		$              1,792.00			Unfavourable-U