EXERCISE 10-1 Direct Materials Variances LO10-1 Bandar Industries Berhad of Mala

Question

EXERCISE 10-1 Direct Materials Variances LO10-1 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 × SP) to make 35,000 helmets? 3. What is the materials spending variance? .What is the materials price variance and the materials quantity variance?

Explanation / Answer

10-1) Calculate following :

Standard quantity allow to make = (35000*.60) = 21000 KG

Standard cost = (21000*8) = 168000

Material spending varinace = (standard cost-actual cost)

                                      = (168000-171000)

Material speding variance = 3000 Unfavourable

Material price variance = (standard price-actual price)actual quantity

                                 = (8*22500-171000)

Material price variance = 9000 Favourable

Material quantity variance = (standard quantity-actual quantity)standard price

                                       = (21000-22500)*8

Material quantity variance = 12000 Unfavourable

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