Question

In: Accounting

Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet...

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 2,625 kilograms of plastic. The plastic cost the company $17,325.

According to the standard cost card, each helmet should require 0.66 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?

(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.)

Solutions

Expert Solution

1) Standard quantity of kilograms of plastic (SQ) that is allowed to make 3,500 helmets         2,310 Kilogram
Working:
Standard quantity of plastic (SQ) that is allowed to make 3,500 helmets = Actual Output*Standard quantity of material per unit of output
= 3500*0.66
= 2310 Kilogram
2)
Standard materials cost allowed (SQ × SP) to make 3,500 helmets $       16,170
Working:
Standard materials cost allowed (SQ × SP) to make 3,500 helmets = Standard Quantity of material*Standard cost per unit of material
= 2310 Kilogram * $       7.00
= $       16,170
3) Material Spending Variance $         1,155 U
Working:
Standard Material cost $       16,170
Actual Material cost $       17,325
Material Spending Variance $         1,155 U
4) Material Price Variance $         1,050 F
Material quantity Variance $         2,205 U
Working:
Actual Price of Material = Actual cost / Actual Material Quantity
= $       17,325 / 2625
= $            6.60
Material Price Variance = (Standard Price -Actual Price)*Actual Material Quantity
= (7.00-6.60)*2625
= $         1,050
Material quantity Variance = (Standard Quantity Variance - Actual Quantity Variance)*Standard Price
= (2310-2625)*7.00
= $        -2,205

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