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 2,380 kilograms of plastic. The plastic cost the company $18,088.

According to the standard cost card, each helmet should require 0.64 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?

(For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Answer 1

· 1.

Standard quantity = 0.64 kg per helmet

Actual output = 3,400 helmets

Hence, standard quantity for actual output = Standard quantity x Actual output

= 3,400 x 0.64

= 2,176 kilogram

2.

Standard price = $8 per kilogram

Standard material cost allowed to make 3,300 helmets = Standard quantity for actual output x Standard price

= 2,176 x 8

= $17,408

3.

Material spending variance = Standard cost - Actual cost

= 17,408 - 18,088

= $680 (Unfavorable)

4.

Actual quantity of material used = 2,380 kilogram

Actual cost of material used = $18,088

Actual price of material = Actual cost of material used/Actual quantity of material used

= 18,088/2,380

= $7.6 per kilogram

Material price variance = Actual quantity x (Standard price - Actual price)

= 2,380 x (8 - 7.60)

= $952 (Favorable)

Direct material quantity variance = Standard price x (Standard quantity - Actual quantity)

= 8 x (2,176 - 2,380)     

= $1,632 (Unfavorable)