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 3,400 helmets, using 2,142 kilograms of plastic. The plastic cost the company $16,279.

According to the standard cost card, each helmet should require 0.56 kilograms of plastic, at a cost of $8.00 per kilogram.

Required:

1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,400 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,400 helmets?

3. What is the materials spending variance?

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

Answer 1

Ans. 1	Standard quantity of kilograms allowed   =   Number of helmets * Standard kilograms of plastic per helmet.
	3,400 * 0.56
	1,904 kilograms
Ans. 2	Total standard cost allowed = Total standard kilograms allowed * Standard cost per kilogram
	1,904 * $8.00
	$15,232
Ans. 3	Materials spending variance = Total standard cost - Actual cost incurred
	$15,232 - $16,279
	-$1,047	(or $1,047 unfavorable)
Ans. 4	Materials price variance = (Standard price * Actual quantity) - Actual materials purchased cost
	($8 * 2,142) - $16,279
	$17,136 - $16,279
	$857	favorable
	Materials quantity variance = (Standard quantity - Actual quantity) * Standard price
	(1,904 - 2,142) * $8
	-238 * $8
	-$1,904	(or $1,904 unfavorable)