Bandar Industries Berhad of Malaysia manufactures sporting equipment Ono of the

Question

Bandar Industries Berhad of Malaysia manufactures sporting equipment Ono 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 2.600 kilograms of plastic. The plastic cost the company $19,780 According to the standard cost card, each helmet should require 0.57 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? (2. Break down the difference computed in (1) above into a materials price variance and a materials quantity variance.

Explanation / Answer

1)

2)

Material price variance

= actual cost - standard price x actual quantity

= $19760 - $8/kg x 2600kg

=$1040 Favourable

Material quantity variance

= Actual quantity x stadard price - standard quantity allowed for actual production x standard price

= 2600 kg x $8/kg - 2280 kg x $8/kg

= $20800 - $18240

= $2560 Unfavourable

Number of helmets 4000 standard kg of plastic per helmet 0.57 total standard kg allowed 2280 total standard cost @$8 per kg ($) 18240 actual cost incurred($) 19760 total standard cost($) 18240 total material variance-unfavourable($) 1520

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