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Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
Edition 2ISBN: 978-1111824402 Exercise 4
Direct Materials Usage Variances: Direct Materials Mix and Yield Variances
Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.
Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. If the controls are not effective, there can be a loss of output and efficiency.
The standard cost of producing a 500-liter batch of Gas Gain is $135. The standard direct materials mix and related standard cost of each chemical used in a 500-liter batch are as follows:
The quantities of chemicals purchased and used during the current production period are shown in the following schedule. A total of 140 batches of Gas Gain were manufactured during the current production period. Energy Products determines its cost and chemical usage variations at the end of each production period.
Required:
Compute the total direct materials usage variance, and then break down this variance into its mix and yield components. (CMA adapted)
Energy Products Company produces a gasoline additive, Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.
Careful controls are required during the production process to ensure that the proper mix of input chemicals is achieved and that evaporation is controlled. If the controls are not effective, there can be a loss of output and efficiency.
The standard cost of producing a 500-liter batch of Gas Gain is $135. The standard direct materials mix and related standard cost of each chemical used in a 500-liter batch are as follows:
The quantities of chemicals purchased and used during the current production period are shown in the following schedule. A total of 140 batches of Gas Gain were manufactured during the current production period. Energy Products determines its cost and chemical usage variations at the end of each production period.
Required:
Compute the total direct materials usage variance, and then break down this variance into its mix and yield components. (CMA adapted)
Explanation
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1. Total direct materials usag...
Cornerstones of Cost Management 2nd Edition by Don Hansen ,Maryanne Mowen
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