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 35,000 helmets, using 22,500 kilograms of plastic. The plastic cost the company $171,000. According to the standard cost card, each helmet should require 0.6 kilograms of plastic, at a cost of $8 per kilogram. Required: 1. According to the standards, what cost for plastic should have been incurred to make 35,000 helmets? How much greater or less is this than the cost that was incurred?

Answer 1

Answer: cost of plastic = $168,000

excess cost = $3000

Explanation: This can be done as follows :-

cost of plastic  = (standard quantity per * (standard price     * ( no. of helmet)

should been          helmet)                             per kg of plastic)

incurred              

                        = (0.6) * (8) * (35,000)

                       = $168,000

so the extra cost incurred is $3000 that is $171,000 - $168,000  .