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 3,000 helmets, using 1,890 kilograms of plastic. The plastic cost the company $12,474 According to the standard cost card, each helmet should require 0.58 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 3,000 helmets? 2. What is the standard materials cost allowed (SQ * SP) to make 3,000 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 (ie, zero variance), Input all amounts as positive values. Do not round intermediate calculations.) 1. 2 3. Standard quantity of kilograms allowed Standard cost allowed for actual output Materials spending variance Materials price variance Materials quantity variance 4.

Answer 1

1. STANDARD QUALITY OF KILOGRAMS ALLOWED

QUANTUTY ALLOWED PER HALMET = 0.58 KG

NO OF HALMETS = 3,000

STANDARD QUALITY OF KILOGRAMS ALLOWED = 3,000 * 0.58 = 1740 KG

2. STANDARD COST ALLOWED FOR ACTUAL OUPUT = STANADRD QUANTITY FOR ACTUAL OUTPUT * SP

= 1740KG * $7 = $12,180

3.MATERIAL SPENDING VARIANCE = STANDRAD COST - ACTUAL COST

= $12,180- $12,474

=$294 (A)

4.MATERIAL PRICE VARIANCE = AQ (SP -AP)

= 1,890 KG ( $ 7 - $12474/1,890KG)

= 1,890 ($ 7 - $6.60 ) = 756 (F)

MATERIAL QUANTITY VARIANCE = SP (SQ- AQ)

= $7(1740KG - 1890KG)

=$1050 (A)