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 3,900 helmets, using 2,574 kilograms of plastic. The plastic cost the company $16,988. According to the standard cost card, each helmet should require 0.60 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 3,900 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,900 helmets?

3. What is the materials spending variance?

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

Answer 1

Answer -

1. Standard quantity of plastics kg ised to make 3900 helmets = 3900×0.6 = 2340

2. Standard material cost = 2340×7 = 16380

3. Material spending variance =

Standard cost - actual cost = 16380- 16988 = 608 unfavorable

4. Material price variance =

(Standard price- actual price ) × actual quantity

=(7-6.599) × 2574 = 1032.174 favourable

Material quantity price =

(Std quantity- actual quantity)× std price

(2340-2574)×7 = 1638 unfavorable

One or two rupee difference due to round off units.