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 3,500 helmets, using 2,170 kilograms of plastic. The plastic cost the company $14,322.

According to the standard cost card, each helmet should require 0.54 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 3,500 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,500 helmets?

3. What is the materials spending variance?

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

Answer 1

	No. of Helmets	3500
	Standard Kg's of plastic per helmet	0.54
1)	Total standard KG allowed	1890
	Standard cost per kilogram	7
2)	Total standard cost	13230
	Actual cost incurred	14322
	Total standard cost	13230
3)	Total material variance	1092	Unfavorable
4)	Material Price variance	868	Favorable
	Material Qty variance	1960	Unfavorable
	Material Price Variance = (Standard Price - Actual Price ) Actual Quantity Purchased
	= (7- (14322/2170 )*2170
	868	Favorable
	Material Quantity Variance = (Standard quantity - Actual Quantity ) Standard Price
	= (1890 - 2170 )*7
	-1960	Unfavorable