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 $171,000 According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram. Required 1. According to the standards, 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? (Round Standard kilograms of plastic per helmet to 1 decimal place.) 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-unfavorable 2. Break down the difference computed in (1) above into a materials price variance and a materials quantity variance. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) Materials price variance Materials quantity variance

Explanation / Answer

a) Number of helmets 35000 b) Standard kgs of plastic 0.6 c) = a*b Total standard kgs allowed 21000 d) Standard cost per kg 8 e) = c*d Total standard cost 168000 f) Actual cost incurred 171000 g) = e) Total standard cost 168000 h) = g-f Total material variance -3000 (Unfavourable) Material price variance = Actual quantity*Standard price - Actual quantity*Actual price 22500*8 - $171000 = $280000-$171000 = $9000F Material quantity variance = Standard price*(Standard quantity - Actual quantity) Standard quantity = As computed in "c" above = 21000 8*(21000-22500) =($12000U)

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