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 3,200 helmets, using 2,368 kilograms of plastic. The plastic cost the company $17,997. According to the standard cost card, each helmet should require 0.69 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 3,200 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.

Ans:

Standard quantity of plastic required for actual production of 3200 helmets= 3200*0.69

              = 2208 Kg

Standard cost of plastic for actual production of 3200 helmets= 2208*$8 per kg

= $17664

Actual cost of materials used in production= $17997

Standard cost is less than actual cost of materials used in production by $333.

2.

Material price variance

= actual quantity of materials used at standard price-Actual cost of materials used in production

= 2368*8-$17997

= $947 F

Materials quantity variance= standard price (actual quantity of materials used –standard quantity of materials for actual production)

=$8(2368-2208)

= $1280 A

Materials cost variance= actual cost- standard cost of materials

                                                 = $17997-$17664

                                                 = $333