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 2,077 kilograms of plastic. The plastic cost the company $13,708.

According to the standard cost card, each helmet should require 0.58 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.)

1. standard quantity of kilograms allowed

2. standard cost allowed for actual output

3. materials spending variance

4. materials prices variancs

materuaks quantity variance

Answer 1

Ans. 1	Standard quantity of kilograms allowed   =   Number of helmets * Standard kilograms of plastic per helmet.
	3,100 * 0.58
	1,798    kilograms
Ans. 2	Total standard cost allowed = Total standard kilograms allowed * Standard cost per kilogram
	1,798 * $7.00
	$12,586
Ans. 3	Materials spending variance = Total standard cost - Actual cost incurred
	$12,586 - $13,708
	$1,122	Unfavorable
	*Standard cost is less than actual cost, so the variance is unfavorable.
Ans. 4	Materials price variance = (Standard price * Actual quantity) - Actual materials purchased cost
	($7 * 2,077) - $13,708
	$14,539 - $13,708
	$831	favorable
	Materials quantity variance = (Standard quantity - Actual quantity) * Standard price
	(1,798 - 2,077) * $7
	(279) * $7
	$1,953	unfavorable
	*Standard quantity is less than actual quantity, so the variance is unfavorable.