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 3,100 helmets, using 2,077 kilograms of plastic. The plastic cost the company $13,708. According to the standard cost card, each helmet should require 0.62 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 3,100 helmets?
2. What is the standard materials cost allowed (SQ × SP) to make 3,100 helmets?
3. What is the materials spending variance?
4. What is the materials price variance and the materials quantity variance? (For requirements 3 and 4, indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values. Do not round intermediate calculations.)

Answer 1

1. 1,922

2. $13,454

3. $254 Unfavorable

4. 831 Favorable

$1,085 Unfavorable

Step-by-step explanation:

1. The computation of standard quantity of kilograms of plastic is shown below:-

Standard quantity of kilograms allowed = Helmets manufactured × Required kilograms of plastic

= 3,100 × 0.62

= 1,922

2. The computation of standard materials cost allowed is shown below:-

Standard cost allowed for actual output = Standard quantity of kilograms allowed × Cost per kilogram

= 1,922 × $7

= $13,454

3. The computation of materials spending variance is shown below:-

Materials spending variance = Plastic cost - Standard cost allowed for actual output

= $13,708 - $13,454

= $254 Unfavorable

4. The computation of materials price variance and the materials quantity variance is shown below:-

Materials price variance = Plastic cost - (Plastic in kilograms × Cost per kilograms)

= $13,708 - (2,077 × $7)

= 831 Favorable

Materials quantity variance = Cost per kilograms × (Plastic in kilograms - Standard quantity of kilograms allowed)

= $7 × (2,077 - 1,922)

= $1,085 Unfavorable

So, we have applied the above formulas.