Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the
ID: 2571818 • 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 3,600 helmets, using 2,844 kilograms of plastic. The plastic cost the company $24,458.
According to the standard cost card, each helmet should require 0.7 kilograms of plastic, at a cost of $9 per kilogram.
Required:
1. According to the standards, what cost for plastic should have been incurred to make 3,600 helmets? How much greater or less is this than the cost that was incurred? (Round "standard kilograms of plastic per helmet" to 1 decimal place.)
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. The cost for plastic that should have been incurred to make 3,600 helmets = 3,600 helmets * 0.7 kilograms per helmets * 9 per kilogram
= 22,680
The cost incurred is greater than the standard cost by 1,778 (24,458 - 22,680).
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2. Actual quantity = 3,600
Actual price = 24,458 / 2,844 = 8.6
Standard price = 9
Materials price variance = Actual quantity * (Standard price - Actual price)
= 2,844 * (9 - 8.6)
= 1,138 favourable.
Standard quantity = 3,600 * 0.7 = 2,520
Actual quantity = 2,844
Standard price = 9
Materials quantity variance = Standard price * (Standard quantity - Actual quantity)
= 9 * (2,520 - 2,844)
= 2,916 unfavourable.
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