4. value: 3.33 points Bandar Industries Berhad of Malaysia manufactures sporting

Question

4.

value:
3.33 points

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 3,400 helmets, using 2,040 kilograms of plastic. The plastic cost the company $13,464.

     According to the standard cost card, each helmet should require 0.53 kilograms of plastic, at a cost of $7.00 per kilogram.

According to the standards, what cost for plastic should have been incurred to make 3,400 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 3,400 helmets, using 2,040 kilograms of plastic. The plastic cost the company $13,464.

Explanation / Answer

1. Cost for Plastic under Standard Costing = 3,400 x 0.53 x $7 = $12,614

Actual cost to the company = $13,464

Difference between actual and standard cost = $13,464 - $12614 = $850

As calculated above, standard cost for plastic should have been $12,614 whereas actual cost was $13,464, which was greater than standards. This means, the actual cost was unfavorable for $850.

2. Standard quantity to manufacture 3,400 helmets = 0.53 KG x 3,400 = 1,802 KG
Actual quantity of plastic used = 2,040
Standard cost of plastic per KG = $7 (Given)
Actual cost of plastic per KG = $13,464/2,040 = $6.60

Material Price Variance = (Standard Price – Actual Price) x Actual Quantity
=> ($7 - $6.60) x 2,040 = $816F

Since it is a positive number, it’s favorable.

Material Quantity Variance = (Standard Quantity – Actual Quantity) x Standard Price
=> (1,802 – 2,040) x $7 = -$1,666U

Since this number is negative, it is unfavorable. It means that due to higher quantity used than standard quantity, company incurred additional expense of $1,666.

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