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 2,135 kilograms of plastic. The plastic cost the company $14,091.

According to the standard cost card, each helmet should require 0.55 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.)

Answer 1

Solution

Standard Quantity of kilogram allowed	1925
Standard cost allowed for actual output	$ 13,475
Material spending variance	$            616.00	Unfavourable-U
Material price variance	$            854.00	Favourable-F
Material quantity variance	$        1,470.00	Unfavourable-U

Working

Standard DATA for		3500	Units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 0.55 kilogram x 3500 Units)=1925 kilogram	$                   7.00	$            13,475.00

.

Actual DATA for		3500	Units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	2135	$            6.60	$          14,091.00

.

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                    7.00	-	$                        6.60	)	x	2135
	854
	Variance		$                   854.00			Favourable-F
Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	1925	-	2135	)	x	$              7.00
	-1470
	Variance		$                1,470.00			Unfavourable-U
Material Spending Variance
(	Standard Cost	-	Actual Cost	)
(	$         13,475.00	-	$             14,091.00	)
	-616
	Variance		$                   616.00			Unfavourable-U