Question

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 3,800 helmets, using 2,774 kilograms of plastic. The plastic cost the company $18,308. According to the standard cost card, each helmet should require 0.67 kilograms of plastic, at a cost of $7.00 per kilogram. Required: 1. What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,800 helmets? 2. What is the standard materials cost allowed (SQ × SP) to make 3,800 helmets? 3. What is the materials spending variance? 4. What is the materials price variance and the materials quantity variance?

Answer 1

Answer:

1. Standard quantity of kilograms

  = 0.67 kg x 3,800

  = 2,546 kg

2. Standard material cost allowed to make 3,800 helmets

  = 0.67 x $7 x 3,800

  = $17,822

3. Material spending variance     $

   Standard material cost           17,822

   Less: Actual material cost      18,308

                                                    486(U)

4. Material price variance

   = (Standard price - Actual price) x Actual quantity purchased

   = ($7 - $6.599855804) x 2774 kg

   = $1,110(F)

   Actual price

   = Actual material cost

      Actual quantity purchased

   = $18,308

        2,774 kg

   = $6.599855804

   Material usage variance

   = (Standard quantity - Actual quantity used) x Standard price

   = (2,546 - 2,774) x $7

   = $1,596(U)

Explanation:

Material spending variance is the difference between standard material cost and actual material cost. Material price variance is the difference between standard price and actual price multiplied by actual quantity purchased. Material usage variance is the difference between standard quantity and actual quantity used multiplied by standard price. Actual price is actual material cost divided by actual quantity purchased. Standard quantity is calculated as standard quantity per unit multiplied by actual output.