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 3,500 helmets, using 2,520 kilograms of plastic. The plastic cost the company $16,632. According to the standard cost card, each helmet should require 0.64 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 3,500 helmets? 2. What is the standard materials cost allowed (SQ * SP) to make 3,500 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 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

Answer 1)

Calculation of standard quantity of kilograms of plastic allowed for actual output of 3,500 helmets

Standard quantity of plastics allowed for actual output = Standard quantity of plastic allowed per unit of helmet X number of helmets manufactured

                                                                                                     = 0.64 kilograms per helmet X 3,500 helmets

                                                                                                       = 2,240 kilograms

Therefore standard quantity of plastic allowed for actual output of 3,500 helmets is 2,240 kilograms.

Answer 2)

Calculation of standard material cost allowed for actual output of 3,500 helmets

Standard material cost allowed for actual output = Standard quantity of plastic allowed for actual output X Standard Cost per kilogram of plastic

                                                                                                     = 2,240 kilograms X $ 7.00 per kilogram

                                                                                                     = $ 15,680

Therefore standard material cost allowed for actual output of 3,500 helmets is $ 15,680.

Answer 3)

Calculation of Material spending variance

Material spending variance = Standard cost of material allowed for Actual output – Actual cost of material incurred

                                                              = $ 15,680 - $ 16,632

                                                               = $ 952 (Unfavorable)

Therefore material spending variance is $ 952 (Unfavorable).

                                  

Answer 4)

Calculation of material price variance

Material price variance = (Standard price per kilogram of material – Actual price per kilogram of material) X Actual quantity of material consumed

                                                        = ($ 7.00 per kilogram - $ 6.60 per kilogram) X 2,520 kilograms

                                                         = $ 1,008 (Favorable)

Therefore material price variance is $ 1,008 (Favorable)

Calculation of material quantity variance

Material quantity variance = (Standard quantity of material allowed for actual output – Actual quantity of material consumed) X Standard price per kilogram of material

                                                                  = (2,240 kilograms – 2,520 kilograms) X $ 7.00 per kilogram

                                                                  = $ 1,960 (Unfavorable)

Therefore material quantity variance is $ 1,960 (Unfavorable).

Working Note:

Calculation of Actual price per kilogram of plastic

Actual price per kilogram of plastic = Actual cost of material consumed/ Actual quantity of material consumed

                                                                       = $ 16,632/ 2,520 kilograms

                                                                       = $ 6.60 per kilogram

Therefore actual per per kilogram of plastic is $ 6.60.