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 3,300 helmets, using 2,343 kilograms of plastic. The plastic cost the company $15,464.

According to the standard cost card, each helmet should require 0.65 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 3,300 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,300 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.)

Answer 1

1) Standard quantity of kilograms of plastic,

= 3,300 helmets * 0.65 kg of plastic per helmet

= 2,145 kiligrams of plastic.

2) Standard materials cost allowed,

= 3,300 helmets * 0.65 kg of plastic * $7 per kg

= $15,015

3) Materials spending variance

A spending variance is the difference between the actual and expected (or budgeted) amount of an expense.

= Budgeted price - Actual price

= $15,015 - $15,464

= $449 U

4) Materials price variance = (Actual price - Standard price) x Actual quantity used

= (6.60 - 7) * 2,343

= $937.2 F

Materials Quantity Variance = ( SQ − AQ ) × SP

Where,
   SQ is the standard quantity allowed
   AQ is the actual quantity of direct material used
   SP is the standard price per unit of direct material

= (2,145 - $2,343)*$7

= $1,386 U