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 3,700 helmets using 2,405 kilograms of plastic. The plastic cost the company $15,873. According to the standard cost card, each helmet should require 0.56 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 3,700 helmets? 2. What is the standard materials cost allowed (SQ x SP) to make 3,700 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 Materials price variance 4. Materials quantity variance

Answer 1

Standard quantity of kilograms allowed = 3,700 helmets*0.56 kgs Standard quantity of kilograms allowed = 2,072 Standard cost allowed for actual output = 2,072*$7.00 Standard cost allowed for actual output = $14,504 Materials spending variance = (Actual quanity*Actual price)-(Standard quantity*Standard price) Materials spending variance = Actual cost-Standard cost allowed Materials spending variance = $15,873 - $14,504 Materials spending variance = $1,369 Unfavorable Materials price variance = (Actual quantity* Actual price) - (Actual quantity* Standard price) Materials price variance = $15,873 - (2,405*$7) Materials price variance = $15,873 - $16,835 Materials price variance = $962 Favorable Materials quantity variance = (Actual quantity*Standard price) - (Standard quantity*Standard price) Materials quantity variance = (2,405*$7)-$14,504 Materials quantity variance = $16,835 - $14,504 Materials quantity variance = $2,331 Unfavorable