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Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company’s products, a football helmet...

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Accounting

Bandar Industries Berhad of Malaysia manufactures sportingequipment. One of the company’s products, a football helmet for theNorth American market, requires a special plastic. During thequarter ending June 30, the company manufactured 3,700 helmets,using 2,368 kilograms of plastic. The plastic cost the company$17,997.

     According to the standard costcard, each helmet should require 0.54 kilograms of plastic, at acost of $8.00 per kilogram.

Required:
1.

According to the standards, what cost for plastic should havebeen incurred to make 3,700 helmets? How much greater or less isthis than the cost that was incurred? (Round Standardkilograms of plastic per helmet to 2 decimal places.)

2.

Break down the difference computed in (1) above into a materialsprice variance and a materials quantity variance. (Roundyour actual materials price to two decimal places, and round yourfinal answers to the nearest whole dollar. Indicate the effect ofeach variance by selecting "F" for favorable, "U" for unfavorable,and "None" for no effect (i.e., zero variance).)

Answer & Explanation Solved by verified expert
3.8 Ratings (586 Votes)

  • Working

1

Standard quantity allowed

0.54

x

3700

=

1998

kgs

2

Standard cost allowed

1998

x

$       8.00

=

$ 15,984.00

  • Requirement 1:
    Cost that should have been incurred = $ 15,984 Answer
    Actual Cost = $ 17,997
    Hence, The cost that should have been incurred is actually LESS than actually incurred by $ 2013 Answer
  • Requirement 2

Material Price Variance

(

Standard Rate

-

Actual Rate

)

x

Actual Quantity

(

$                                8.00

-

$                       7.60

)

x

2368

947

Variance

$                  947.00

Favourable-F

Material Quantity Variance

(

Standard Quantity

-

Actual Quantity

)

x

Standard Rate

(

1998

-

2368

)

x

$                           8.00

-2960

Variance

$              2,960.00

Unfavourable-U

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