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

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. the company manufactured 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company S171,000 the quarter ending June 30, According to the standard cost card, each helmet should require 0.8 kilograms of plastic, at a cost of $8 per kilogram Required 1. According to the standards, what cost for plastic should have been incurred to make 35,000 helmets? How much greater or less is this than the cost that was incurred? (Round Standard kilograms of plastic per helmet to 1 decimal place.) Number of helmets Standard kilograms of plastic per h Total standard kilograms allowed Standard cost per kilogram Total standard cost Actual cost incurred Total standard cost Total material variance-unfavorable elmet 2. Break down the difference computed in (1) above into a materials price variance and a materials quantity variance (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (ie., zero variance).) Materials price varian0e Materials quantity variance

Explanation / Answer

According to standard, what cost for plastic should been incurred to make 35000 helmets? How much greater or less is this than the cost that was incurred :

2) Break down :

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

                                 = (8*22500-171000)

Material price variance = 9000 F

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

                                      = (21000-22500)8

Material quantity variance = 12000 U

Number of helmets 35000 Standard kilograms of plastic per helmet .60 Total standard kilograms allowed 21000 standard cost per kilogram 8 Total standard cost 168000 Actual cost incurred 171000 Total standard cost 168000 Total material variance-Unfavourable 3000

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