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 3,900 helmets. using 2,457 kilograms of plastic. The plastic cost the company $16,216. According to the standard cost card, each helmet should require 0.54 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 3.900 helmets? 2. What is the standard materials cost allowed (SQ SP) to make 3.900 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 varlance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (.e., zero varlance). Input all amounts as positive values. Do not round Intermediate calculations.) Standard quantity of kilograms allowed Standard cost allowed for actual output Materials spending variance Materials price variance Materials quantity variance

Answer 1

The answers are as follows,

1. The standard quantity allowed per 1 helmet is 0.54 kilogram. Therefore for 3,900 helmets the requirement would be 2,106 kilograms.
2. The standard cost is 7 per kilogram. And for actual output standard cost would be 2,106 x 7 = $14,742.
3. The formula for material spending varience is, actual quantity x actual price - standard quantity x standard price, that is 16,216 - 2,106 x 7 = 1,474 unfavourable.
4. The answers are as follows,
   1. Material price varience formula is, actual quantity x (actual price - standard price) = actual cost - actual quantity x standard price = 16,216 - (2,457 x 7) = 983 unfavourable.
   2. Material quantity varience formula is, (actual quantity - standard quantity) x standard price. That is (2,457 - 2,106) x 7 per kilogram = 2,457 unfavourable.