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Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher
Edition 3ISBN: 0073527114Materials Mix and Yield Variances
Houston Corporation manufactures a wide variety of chemical compounds and liquids for industrial uses The standard mix for producing a single batch of 1,000 liters of Rust-Off is as follows:
Input Chemical | Quantity (in liters) | Cost (per liter) | Total Cost |
z-Alpha | 600 | $ 9 | $ 5,400 |
z-Beta | 450 | 12 | 5,400 |
z-Gamma | 200 | 24 | 4,800 |
| 1,250 |
| $15,600 |
?There is a 20 percent loss in liquid volume during processing due to evaporation The finished liquid is put into 5-liter bottles for sale Thus, the standard material cost for a 5-liter bottle is $78.
?The actual quantities of direct materials and the cost of the materials placed in production during March were as follows (materials are purchased and used at the same time):
Input Chemical | Quantity (in liters) | Total Cost |
z-Alpha | 50,400 | $ 423,360 |
z-Beta | 37,040 | 400,464 |
z-Gamma | 16,960 | 417,216 |
| 104,400 | $1,241,040 |
A total of 16,000 bottles (80,000 liters) were produced during March.
Required
Calculate the total direct material variance for the liquid product for the month of March and then further analyze the total variance into:
a. Materials price and efficiency variances.
b. Materials mix and yield variances.
Verified
Step 1 of 6
H Corporation manufactures chemical compounds by using some input chemicals which are ZA, ZB and ZG. The standard quantity of inputs required for output of 1,000 litres of output is given. There will be a loss of 20% of input. The standard material cost for 5 litres bottle is $78. During the month of March 16,000 bottles were produced.
a.
Material price variance and efficiency variance of the H Corporation for the month of March is calculated as under:
The material price variance is the difference between standard cost of chemicals used for output and the actual cost incurred.
| ZA | ZB | ZC | Total | |
| Standard cost of input per litre (SP) | $9 | $12 | $24 | |
| Actual input of chemicals used (AQ) | 50,400 | 37,040 | 16,960 | 104,400 |
| Standard cost of actual input of chemicals used (SP×AQ) | $453,600 | $444,480 | $407,040 | $1,305,120 |
| Actual cost of input | $423,360 | $400,464 | $417,216 | $1,241,040 |
| Material price variance | $30,240F | $44,016F | $10,176U | $64,080F |
Total standard cost of actual input used is calculated as under:
The actual cost incurred for the month of March is calculated as under;
The material price variance of JW is calculated as under:
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