2. Clark manufactures a special helmet that requires a special plastic. During t

Question

2. Clark manufactures a special helmet that requires a special plastic. During the year ending December 31, the company manufactured 70,000 helmets, using 45000 kilograms of plastics. The plastic cost the company $342,000. According to the standard cost card, each helmet should require 0.7 kilograms of plastic, at a cost of $7 per kilogram. (1). According to the standard cost card, what cost for plastic should have been incurred to make 70,000 helmets? How much greater or less is this than the cost was incurred? (7 points) (2). Breakdown the difference computed in (1) above into a materials price variance and a materials quantity variance. (7 points)

Explanation / Answer

1.

Actual cost= 342000

Actual cost is less than standard cost by 1000 (343000-342000)

2. Break down

Actual rate= Total actual cost/ units purchased= 342000/45000= 7.6 per kg

Ref Particulars Total a Actual output            70,000 b Direct material required per unit of output                   0.7 c=a*b Standard quantity of direct material required            49,000 d standard cost per unit of material                       7 e=c*d standard cost        3,43,000

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