Exercise 8-4 Direct Materials Variances Bandar Industries Berhad of Malaysia man

Question

Exercise 8-4 Direct Materials Variances

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. 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.

1. According to the standards, what cost for plactis should have been incurred to make 35,000 helmets? How much greater or less is this than the cost that was incurred?

2. Break down the different computed in (1) above into a materials price variance and a materials quantity variance.

Explanation / Answer

Bandar Industries Barhad Details All monetary amts n $ a Standard Qty of plastic per helmet -kg 0.6 b Standard cost/Kg 8 c Helmets made                      35,000 d Std qty of plastic for production=a*c                      21,000 e Standard cost of plasticfor production=d*b                    168,000 Actual cost of plastic used                    171,000 Ans 1 so cost incurred should be $                168,000 The actual cost is gretaer than std $ 3000 Ans 2 Total variance is 3000 U it cannot be broken down to material price and qty variance unless the rate or qty of actual material used is provided.

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