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 3,200 helmets, using 1,952 kilograms of plastic. The plastic cost the company $14,835.

According to the standard cost card, each helmet should require 0.53 kilograms of plastic, at a cost of $8.00 per kilogram.

Required:

1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,200 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,200 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

1. Standard quantity ( SQ ) = 3,200 * 0.53

>> Standard quantity ( SQ ) = 1,696 Kilograms.

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2. Standard material cost ( SQ X SP ) = ( 1,696 * $ 8 )

>> Standard material cost ( SQ X SP ) = $ 13,568.

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3. Material Spending variance = Standard material cost - Actual material cost

>> Material Spending variance = $ 13,568 - $ 14,835

>> Material Spending variance = $ 1,267 Unfavorable.

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4. Actual Material price ( AP ) = $ 14,835 / 1,952 = $ 7.60.

>> Material price variance = ( SP - AP ) * AQ

>> Material price variance = ( $ 8 - $ 7.6 ) * 1,952

>> Material price variance = $ 780.8 Favorable.

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>> Material quantity variance = ( SQ - AQ ) * SP

>> Material quantity variance = ( 1,696 - 1,952 ) * $ 7.6

>> Material quantity variance = $ 1,945.6 Unfavorable.

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