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 3,400 helmets, using 2,618 kilograms of plastic. The plastic cost the company $17,279. According to the standard cost card, each helmet should require 0.69 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 3,400 helmets? 2. What is the standard materials cost allowed (SQ × SP) to make 3,400 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

Answer 1

Standard quantity

2,346 Kilograms

3400 units * 0.69

Answer 2

SQ * SP = 2,346 * $ 7 = $ 16,422

Answer 3

Materials spending variance = $ 17,279 - $ 16,422 = $ 857 (U)

Answer 4

Material Price Variance = (Standard Price-Actual price)*Actual Quantity

Material Price Variance = ($ 7 - $ 6.60) * 2,618

Material Price Variance = $ 1,047 (F)

Material Quantity Variance = (Standard quantity-Actual Quantity)*Standard Price

Material Quantity Variance = (2,346 - 2,618) * $ 7

Material Quantity Variance = $ 1,904 (U)

In case of any doubt, please comment.