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 3,700 helmets, using 2,331 kilograms of plastic. The plastic cost the company $17,716.

According to the standard cost card, each helmet should require 0.55 kilograms of plastic, at a cost of $8.00 per kilogram.

Required:

1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,700 helmets?

2. What is the standard materials cost allowed (SQ × SP) to make 3,700 helmets?

3. What is the materials spending variance?

4. What is the materials price variance and the materials quantity variance?

Explanation / Answer

1. Standard quantity = 3,700 X 0.55 kg = 2,035 kilograms of plastic

2. Standard materials cost = 2,035 x $8 = $16,280

3. Materials spending variance = Standard cost - Actual cost
= $16,280 - $17,716 = $1,436 Unfavorable

4.Materials price variance = (Standard price - Actual price) x Actual qty
= {$8 - ($17,716 / 2,331)} x 2,331 = $932 Favorable

Materials quantity variance = (Standard qty - Actual qty) x Standard price
= (2,035 - 2,331) x $8 = $2,368 Unfavorable

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