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?
The standard quantity of kilograms of plastic (SQ) that is allowed to make 3,400 helmets is calculated as follows:
SQ = Number of helmets produced × Standard quantity per helmet
SQ = 3,400 helmets × 0.50 kilograms per helmet
SQ = 1,700 kilograms of plastic
The standard materials cost allowed (SQ × SP) to make 3,400 helmets is calculated as follows:
Standard materials cost allowed = Standard quantity × Standard price per kilogram
Standard materials cost allowed = 1,700 kilograms × $8.00 per kilogram
Standard materials cost allowed = $13,600
The materials spending variance is calculated as the difference between the actual cost of the plastic used and the standard materials cost allowed:
Materials spending variance = Actual cost - Standard materials cost allowed
Materials spending variance = $15,246 - $13,600
Materials spending variance = $1,646
The materials price variance is calculated as the difference between the actual price paid for the plastic and the standard price per kilogram multiplied by the actual quantity used:
Materials price variance = (Actual price - Standard price) × Actual quantity
Materials price variance = ($15,246/2,006 kg - $8.00/kg) × 2,006 kg
Materials price variance = ($7.60 - $8.00) × 2,006 kg
Materials price variance = -$0.40 × 2,006 kg
Materials price variance = -$802.40
The materials quantity variance is calculated as the difference between the actual quantity used and the standard quantity allowed multiplied by the standard price per kilogram:
Materials quantity variance = (Actual quantity - Standard quantity) × Standard price
Materials quantity variance = (2,006 kg - 1,700 kg) × $8.00/kg
Materials quantity variance = 306 kg × $8.00/kg
Materials quantity variance = $2,448
Therefore, the materials spending variance is $1,646, the materials price variance is -$802.40, and the materials quantity variance is $2,448.