Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the
ID: 2473385 • Letter: B
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 2,432 kilograms of plastic. The plastic cost the company $16,051. According to the standard cost card, each helmet should require 0.68 kilograms of plastic, at a cost of $7.00 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).)
Explanation / Answer
1. According to the standards,the cost for plastic should have been incurred to make 3,200 helmets = 3200 * 0.68 * $7 = $15232. The standard cost is less by $819 (15232 - 16051) of the actual cost incurred.
2. The difference in the spending of material cost of $819 (which is a Unfavourable position because more been spent) can be break down as :
a) materials price variance = (Actual price - standard price) Actual quantity of material used
= (6.60 - 7.00) 2432 = $973 F
b)materials quantity variance = (Actual quantity - Standard quantity for actual production) standard price
= (2432 - 2176) 7 = $1792 UF
reconciliation with spending difference of $819 UF = 1792 UF - 973 F = 819 UF
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