Exercise 10-1 Direct Materials Variances LO10-1 Bandar Industries Berhad of Mala
ID: 2560627 • Letter: E
Question
Exercise 10-1 Direct Materials Variances LO10-1 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 4,000 helmets, using 2,800 kilograms of plastic. The plastic cost the company 521,280 According to the standard cost card, each helmet should require 0.83 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 4,000 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.) Number of helmets Standard kilograms of plastic per helmet Total standard kilograms allowed Standard cost per kilogram Total standard cost Actual cost incurred Total standard cost Total material variance-unfavourable 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 (ie., zero variance).) Materials price variance Materials quantity varianceExplanation / Answer
1.
2.
Materials Price variance = (Actual price - Standard price) * Actual quantity
= [7.6(21,280/2,800) - 8] * 2,800
= 1,120 Favourable
Materials Quantity variance = (Actual quantity - Standard quantity) * Standard price
= [2800 - 2,520(4,000*0.63)] * 8
= 2,240 Unfavourable
Number of helmets 4,000 Standard kilograms of plastic per helmet 0.63 Total standard kilograms allowed 2,520 (4,000*0.63) Standard cost per kilogram 8 Total standard cost 20,160 (2,520*8) Actual cost incurred 21,280 Total standard cost 20,160 Total material variance-unfavourable 1,120 UnfavourableRelated Questions
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