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 3,500 helmets, using 2,065 kilograms of plastic. The plastic cost the company $15,694.

According to the standard cost card, each helmet should require 0.5 kilograms of plastic, at a cost of $8 per kilogram.

Required:

1. According to the standards, what cost for plastic should have been incurred to make 3,500 helmets? How much greater or less is this than the cost that was incurred? (Round "standard kilograms of plastic per helmet" to 1 decimal place.)

Number of Helmets

Standard Kilograms of plastic per helmet

total standard kilograms allowed

standard cost per killogram

total standard cost

actual cost incurred

total standard cost

total material variance

Answer 1

Solution:-

Part 1)

The completed table is given below:

Part 2)

The formulas for calculating material price and material quantity variances are given below:

Material Price Variance = Actual Material*(Actual Rate - Standard Rate)

Material Quantity Variance = Standard Rate*(Actual Material Used - Standard Material Allowed for Actual Production)

______

Using the values provided in the question, we get,

Material Price Variance = 2065*(15694/2065 - 8) = $826 (Favorable)

Material Quantity Variance = 8*(2065 - 0.50*3,500) = $2520 (Unfavorable)