Exercise 8-4 Direct Materials Variances [LO8-4] Bandar Industries Berhad of Mala

Question

Exercise 8-4 Direct Materials Variances [LO8-4]

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 3,100 helmets, using 1,891 kilograms of plastic. The plastic cost the company $14,372.

     According to the standard cost card, each helmet should require 0.54 kilograms of plastic, at a cost of $8.00 per kilogram.

According to the standards, what cost for plastic should have been incurred to make 3,100 helmets? How much greater or less is this than the cost that was incurred? (Round Standard kilograms of plastic per helmet to 2 decimal places.)

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).)

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 3,100 helmets, using 1,891 kilograms of plastic. The plastic cost the company $14,372.

Explanation / Answer

1) According to the standards, what cost for plastic should have been incurred to make 3,100 helmets? How much greater or less is this than the cost that was incurred

Standard cost = 3100*0.54*8 = 13392

Actual cost = 14372

Actual cost is greater than standard cost 980

b) Material price variance = (8*1891-14372) = 756 F

Material quantity variance = (3100*.54-1891)*8 = 1736 U

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