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 3,700 helmets, using 2,516 kilograms of plastic. The plastic cost the company $19,122.

According to the standard cost card, each helmet should require 0.63 kilograms of plastic, at a cost of $8.00 per kilogram.

Questions:

a. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,700 helmets?

b. What is the standard materials cost allowed (SQ × SP) to make 3,700 helmets?

c. What is the materials spending variance?

d. What is the materials price variance and the materials quantity variance?

Answer 1

a.

Standard quantity (SQ) = 3,700 helmets * 0.63 kilograms

= 2,331

b.

Standard materials cost (SQ*SP) = 2,331 * $8

= $18,648

c.

Materials spending variance = Actual cost - Standard cost

= $19,122 - $18,648

= $474 Unfavourable

d.

Materials price variance = (Actual quantity*Actual price) - (Actual quantity*Standard price)

= $19,122 - (2,516*$8)

= $1,006 Favourable

Materials usage variance = (Actual quantity*Standard price) - (Standard quantity*Standard price)

= (2,516*$8) - $18,648

= $1,480 Unfavourable