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 2,345 kilograms of plastic. The plastic cost the company $15,477.

     According to the standard cost card, each helmet should require 0.61 kilograms of plastic, at a cost of $7.00 per kilogram.

Required:
1.	According to the standards, what cost for plastic should have been incurred to make 3,500 helmets? How much greater or less is this than the cost that was incurred? (Round Standard kilograms of plastic per helmet to 2 decimal places.)

      

2.	Break down the difference computed in (1) above into a materials price variance and a materials quantity variance. (Round your actual materials price to two decimal places, and round your final answers to the nearest whole dollar. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

     

Answer 1

According to the standards, what cost for plastic should have been incurred to make 3,500 helmets? How much greater or less is this than the cost that was incurred?

Material cost variance = (Standard cost-actual cost)

= (3500*0.61*7)-15477

Material cost variance = 532 U

Break down the difference computed in (1) above into a materials price variance and a materials quantity variance.

Material price variance = (7*2345-15477) = 938 F

Material quantity variance = (3500*.61-2345)*7 = 1470 U