Question

EXERCISE 10-1 Direct Materials Variances (L010-1] 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 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000.

Answer 1

1) Standard cost= 35000 helmets*0.6 kgs*$8.00 per kg

= $168000

Variance= Standard cost-Actual cost

= $168000-171000

= $3000 U

2) Materials price variance= (Actual quantity*Standard price)-(Actual quantity*Actual price)

= (22500*$8.00)-171000

= $9000 F

Materials quantity variance= (Standard quantity*Standard price)-(Actual quantity*Standard price)

= (35000*0.6*$8.00)-(22500*$8.00)

= $12000 U