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 4,000 helmets, using 2,760 kilograms of plastic. The plastic cost the company $18,216.

According to the standard cost card, each helmet should require 0.63 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 4,000 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 4,000 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 price variance Materials quantity variance

Answer 1

(1)

Standard quantity allowed = actual output x standard quantity per unit of output

= 4000 x 0.63

= 2520 kg

(2)

per unit:

standard quantity x standard price = 0.63 kg x $7

= $4.41

total:

Standard cost allowed for actual output = (standard quantity x standard price)

= (2520 x $7)

= $17640

(3)

Total direct material variance = (standard quantity x standard price) - (actual quantity x actual price)

= (2520 x $7) - (2760 x $6.6)

= $17640 - $18216

= $576 Unfavorable

Where,

Standard quantity = actual output x standard quantity per unit of output

= 4000 x 0.63 = 2520 kg

And

Actual price = material cost paid/units of material purchased

= $18216/2760 = $6.6

(4)

(A)

Material price variance = actual quantity x (standard price - actual price)

= 2760 x ($7 - $6.6)

= $1104 Favorable

(B)

Material quantity variance = standard price x (standard quantity - actual quantity)

= $7 x (2520 - 2760)

= $1680 Unfavorable