Question

Bandar Industries manufactures sporting equipment. One of the company’s products is a football helmet that requires special plastic. During the quarter ending June 30, the company manufactured 3,400 helmets, using 2,006 kilograms of plastic. The plastic cost the company $15,246. According to the standard cost card, each helmet should require 0.50 kilograms of plastic, at a cost of $8.00 per kilogram. Required: What is the standard quantity of kilograms of plastic (SQ) that is allowed to make 3,400 helmets? What is the standard materials cost allowed (SQ × SP) to make 3,400 helmets? What is the materials spending variance? What is the materials price variance and the materials quantity variance?

Answer 1

The standard quantity of plastic allowed for 3,400 helmets is 1,700 kg, with a standard cost of $13,600. The materials spending variance is $1,646 unfavorable, comprising a $14,236 unfavorable price variance and a $2,448 favorable quantity variance.

Let's calculate the standard quantity (SQ) of kilograms of plastic allowed to make 3,400 helmets:

`\[ SQ = \text{Number of Helmets} * \text{Standard Quantity per Helmet} \]\\ SQ = 3,400 \, \text{Helmets} * 0.50 \, \text{kg per Helmet} = 1,700 \, \text{kg} \]`

Now, calculate the standard materials cost allowed (SQ × SP) to make 3,400 helmets:

The materials spending variance is the difference between the actual cost and the standard cost allowed:

Now, let's break down the variance into price and quantity variances:

`\[ \text{Materials Price Variance} = (\text{Actual Price} - \text{Standard Price}) * \text{Actual Quantity} \]\\\ \text{Materials Price Variance} = ($15,246 - $8.00/\text{kg}) * 2,006 \, \text{kg} = $14,236 \, \text{Unfavorable} \text{Materials Quantity Variance} = (\text{Actual Quantity} - \text{SQ}) * \text{Standard Price} \]\\\text{Materials Quantity Variance} = (2,006 \, \text{kg} - 1,700 \, \text{kg}) * $8.00/\text{kg} = $2,448 \, \text{Favorable} \]`

In summary:

- Standard Quantity (SQ) = 1,700 kg

- Standard Materials Cost Allowed = $13,600

- Materials Spending Variance = $1,646 Unfavorable

- Materials Price Variance = $14,236 Unfavorable

- Materials Quantity Variance = $2,448 Favorable