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 4,000 helmets, using 2,640 kilograms of plastic. The plastic cost the company $20,064. According to the standard cost card, each helmet should require 0.56 kilograms of plastic, at a cost of $8.00 per kilogram. Required:

1. According to the standards, what cost for plastic should have been incurred to make 4,000 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.)

Number of helmets
Standard kilograms of plastic per helmet
Total standard kilograms allowed
Standard cost per kilogram
Total standard cost
Actual cost incurred
Total standard cost
Total material variance—unfavorable

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).)

Materials price variance
Materials quantity variance

Answer 1

1. The standard price for plastic to make 4,000 helmets and total cost variance is calculated as under:

2. Material Price Variance = (Standard Price - Actual Price) x Actual Quantity

= (8 - 20,064 / 2,640) x 2,640

= (8 - 7.60) x 2,640

= 1,056 or 1,056 Favorable

Material Quantity Variance = (Standard Quantity – Actual Quantity) x Standard Price

= (2,240 - 2,640) x 8

= -3,200 or 3,200 Unfavorable