Question

Exercise 8-4 Direct Materials Variances [LO8-4]

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 3,000 helmets, using 2,190 kilograms of plastic. The plastic cost the company $16,644.

     According to the standard cost card, each helmet should require 0.67 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 3,000 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.)

      

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).)

     

Answer 1

1	Numer of helmets	3000
	Standard kilograms of plastic	0.67
	Total standard kilograms allowed (3000*.67)	2010
	Standard cost per kilogram	8
	Total standard cost	16080
	Actual cost incurred	16644
	Total material variance (16644-16080)	564	unfavorable
2	Material price variance
	( Standard price- actual price)* Actual quantity
	(8-(16644/2190))*2190	876	favorable
	Material quantity variance
	( Standard quantity-Actual quantity)*standard price
	(2010-2190)*8	1440	unfavorable