Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 25

Materials Mix and Yield Variances

Huron Group had the following direct materials data for its product:

Standard costs for one unit of output
Material Twinkle	20 units of input at $20
L Material Star	40 units of input at $30

During October, the company had the following results:

Units of output produced 2,000 units
Materials purchased and used
Material Twinkle	44,000 units at $18
Material Star	76,000 units at $32

Required

a. Compute materials price and efficiency variances.

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b. Compute materials mix and yield variances.

Step 1 of 11

Cost accounting

This system is designed for inhouse or internal managers and their decision making. Cost accounting information is not needed for comparison with other companies. This information is commonly used in financial accounting also, but it is primarily used by company managers for their decision making. It is important that cost accounting information is relevant for the decision making of the manager.

Cost variances

Cost variance is the difference between actual quantities (AQ) multiplied with actual price (AP) and standard quantities (SQ) multiplied with standard price (SP).