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 2,695 kilograms of plastic. The plastic cost the company $17,787.
According to the standard cost card, each helmet should require 0.67 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?
Bandar Industries | ||
Part 1 | ||
Number of helmets | 3500 | |
Standard kilograms of plastic per helmet | 0.67 | |
Total standard kilograms allowed | 2345 | |
Standard cost per kilogram | 7 | |
Total standard cost | 16415 | |
Actual cost incurred | 17787 | |
Total standard cost | 16415 | |
Total material variance—unfavorable | 1372 | |
Part 2 | ||
MPV = ( SP - AP ) * AQ purchased | ||
MPV = ( 7 - 6.6 ) * 2695 = $ 1078 ( favourable ) | AP = 17787 / 2244 | 2695 |
MQV = ( SQ - AQ ) SP | ||
MQV = ( 2345 - 2695 ) * 7 = $ 2450 ( unfavourable ) | ||
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