Question

Help Save & Exit Exercise 10-1 Direct Materiais variances (LU10-1) Check 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 2.485 kilograms of plastic. The plastic cost the company $16,401 According to the standard cost card, each helmet should require 0.62 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 3,500 helmets? 2. What is the standard materials cost allowed (SQSP) to make 3,500 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 os positive values. Do not round intermediate calculations.) 1. 2 3,500 $ 3 Standard quantity of kilograms allowed Standard cost allowed for actual output Materials spending variance Materials price variance Materials quantity variance 4

Answer 1

1	Standard quantity of kilograms allowed (3,500*0.62)	2,170
2	Standard cost allowed for actual output (2,170*$7)	$15,190
3	Material spending variance ($15,190-$16,401)	$1,211	Unfavorable
4	Material price variance	$994	Favorable
	Material quantity variance	$2,205	Unfavorable

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

Material price variance = ($16,401/2,485 - $7) * 2,485

Material price variance = ($6.6 - $7) * 2,485 = $994 Favorable

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

Material quantity variance = (2,170 - 2,485) * $7 = $2,205 Unfavorable

1	Standard labor hours allowed (6,500*0.50)	3,250
2	Standard labor cost allowed (3,250*$11)	$35,750
3	Labor spending variance ($35,750 - $36,800)	$1,050	Unfavorable
4	Labor rate variance	$1,600	Unfavorable
	Labor efficiency variance	$550	Favorable

Labor rate variance = (Actual rate - Standard rate) * Actual hours

Labor rate variance = ($11.50 - $11) * 3,200 = $1,600 Unfavorable

Labor efficiency variance = (Standard hours - Actual hours) * Standard rate

Labor efficiency variance = (3,250 - 3,200) * $11 = $550 Favorable