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 3,100 helmets, using 2,046 kilograms of plastic. The plastic cost the company $13,504.

According to the standard cost card, each helmet should require 0.57 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 3,100 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,100 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

Answer:

1.	Standard quantity of kilograms allowed	1767
2.	Standard cost allowed for actual output	$ 12,369
3.	Material Spending variance	$ 1135	U
4.	Material Price Variance	$ 818	F
	Material Quantity Variance	$ 1,953	U

1. Calculation of Standard quantity of kilograms allowed is as follows:

Standard quantity of kilograms allowed( SQ) = Actual Productioon of units * Standard Quantity of direct material required per unit

= 3,100 * 0.57

= 1,767 kilograms

2. Calculation of standard cost allowed for actual output is as follows:

Standard cost allowed for actual output = Standard quantity of kilograms allowed (SQ) * Standard cost per kilogrms (SP)

= 1,767 * $ 7

= $ 12,369

3. Calculation of Material Spending variance is as follows:

Material Spending variance = Standard Cost - Actual cost

= $ 12,369 - $ 13,504

= $ 1135 U

Thus, Material Spending variance is $ 1135 U

4. Calculation of Direct material price variance:

Material Price Variance= (AQ * AP ) - ( AQ * SP )

= $ 13,504 - ( 2,046 * $ 7 )

= $ 13,504 - $ 14,322

= $ 818 F

Thus, Material Price Variance is $ 818 F

Calculation of Material Quantity Variance is as follows:

Material Quantity Variance = ( SQ - AQ ) * SR

= ( 1,767 - 2,046 ) * $ 7

= $ 1,953 U

Thus, Material Quantity Variance is $ 1,953 U

Where,

SQ	=	Standard Quantity of Direct Material for actual output
AQ	=	Acutal Quantity of Direct Material used
SP	=	Standard Price of Direct material per unit (Standard Price per kilograms)
AP	=	Actual Price of Direct material per unit (Actual Price per kilograms)

Note;

1. "F" Stands for Favorable & "U" stands for unfavorable

2. For verfication of answer:

Material Spending variance = Material Price Variance + Material Quantity Variance

thus,

$ 1135 U = $ 818 F + $ 1953 U

$ 1135 U = $ 1135