Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the

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 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company RMI71,000. (The currency in Malaysia is the ringgit, which is denoted here by RM.) According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of RM8 per kilogram.

Required:
l. What cost for plastic should have been incurred to make 35,000 helmets? How much greater or less is this than the cost that was incurred?

2. Break down the difference computed in (1) above into a materials price variance and a materials quantity variance.

Explanation / Answer

Standard Material Cost of 35,000 helmets (35,000 * 0.6 * 8 ) 168000 This can be broken into Material Price Variance (MPV) Material Quantity Variance (MQV) For Material Price Variance (MPV), Actual Quantity used (AQ) 22,500 Standard Price (SP) 0.6 Actual Price ( AP ) 0.64 MPV= AQ( SP - AP ) 900 (A) For Material Quantity Variance (MQV) SP (SQ - AQ ) 0.6 ( 21,000 - 22,500 ) -900 (A )

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