Question

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 1,914 kilograms of plastic. The plastic cost the company $14,546.

According to the standard cost card, each helmet should require 0.51 kilograms of plastic, at a cost of $8.00 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

Given information

• AQ= 1914 kgs
• AQ*AP=$14,546
• SQ= 0.51 kg per helmet
• SR=$8 per kg
• Actual unit = 3,300 helmets

1) Total standard quantity =0.51 kg per unit *3,300 helmets

=1,683 kgs

2)Standar material cost =SP*SQ

$8 per kg*1,683 kgs

=$13,464

3)Material spending variance

=(SP*SQ)-(AP*AQ)

=$13,464-$14,546

=$1,082 Unfavorable (As the actual cost is higher than the standard for 3,300 helmets the variance is unfavorable)

4) Material price variance

AQ (SP-AP)

=AQ*SP - AQ*AP

=($8*1914)-$14,546

=$766 Favorable (As the actual rate is lower than the standard rate the variance is favorable)

Material Quantity variance

SP(SQ-AQ)

=SP*SQ-SP*AQ

=($8*1,683 )- ($8*1914)

=$13,464-$15,312

=$1,848 Unfavorable ( As the acual quantity is more than the standard quantity the variance is unfavorable)

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