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. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 35,000 helmets? 2. What is the standard materials cost allowed (SQ x SP) to make 35,000 helmets? 3. What is the materials spending variance? . What is the materials price variance and the materials quantity variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.) 1. 2. 3. 4. Standard quantity of kilograms allowed Standard cost allowed for actual output Materials spending variance Materials price variance Materials quantity variance

Explanation / Answer

The completed table is given below: Number of Helmets 35,000 Standard Kilograms of Plastic Per Helmet 0.6 1)Total Standard Kilograms Allowed (3,5000*.60) 21,000 Standard Cost Per Kilogram $8 2)Total Standard Cost (21000 kg *$8) 168,000 Actual Cost Incurred 171,000 Total Standard Cost 168,000 3)Total Material Variance – Unfavorable $3,000 4)Material Quantity Variance- Un Favourable 9,000 Material Price Variance- Favourable 12,000 Working Note The formulas for calculating material price and material quantity variances are given below: Material Price Variance = Actual Material*(Actual Rate - Standard Rate) Material Quantity Variance = Standard Rate*(Actual Material Used - Standard Material Allowed for Actual Production) Using the values provided in the question, we get, Material Price Variance = 22500 ($171000/22500 -$ 8) = $9000 (Favorable) Material Quantity Variance = $8*(22500-21000) = $12000 (Unavorable)

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