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 3,800 helmets, using 2,660 kilograms of plastic. The plastic cost the company $17,556.

According to the standard cost card, each helmet should require 0.63 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 3,800 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,800 helmets?

3. What is the materials spending variance?

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

Answer 1

Standard DATA for		3800	Helmets
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 0.63 Kilo grams x 3800 Helmets)=2394 Kilo grams	$          7.00	$      16,758.00

Actual DATA for		3800	Helmets
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	2660	$    6.60	$     17,556.00

Requirement 1

Standard Kilo grams of plastic =2394 Kilo grams

Requirement 2

Standard material cost=$16758

Requirement 3

Material Spending Variance =$798 Favorable

Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$             17,556.00	-	$            16,758.00	)
	798
	Variance		$                  798.00			Favourable-F

Requirement 4

Material Price Variance	$        1,064.00	Favorable
Material quantity variance	$        1,862.00	Unfavorable

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                        7.00	-	$                       6.60	)	x	2660
	1064
	Variance		$              1,064.00			Favourable-F

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	2394	-	2660	)	x	$                           7.00
	-1862
	Variance		$              1,862.00			Unfavourable-U