<cite>@johnmoffat said:</cite>
There are several ways of calculating the yield variance (all obviously giving the same answer!).
To avoid confusion I will do it the same was as in my lecture (and in our course notes).

On the cost card we expect to input a total of 100 tonnes at a total cost of $340. However because of the standard loss, we expect to produce 100 – 5% = 95 tonnes at a cost of $340.

For the yield variance we compare actual total input (at standard mix and standard cost) with standard total input for actual output (at standard mix and standard cost).

The actual total input was 200+250 = 450 tonnes. At standard mix would have been 180 of X (40% x 450) and 270 of Y (60% x 450).

The standard total input should have been 100 tonnes for every 95 tonnes produced. So for the actual production of 423 tonnes, the total input should have been 100/95 x 423 = 445 tonnes. As standard mix this would have been 178 of X (40% x 445) and 267 of Y (60% x 445).

If you cost both these out at standard costs then the difference between the two is the yield variance.
(There is a bit of rounding obviously, but this is not a problem for the exam)

Thank you for you for your reply. However, just to make sure (I still have a problem on how to get the standard total input of 445 tonnes, so could you clarify this further). You said “the standard total input should have been 100 tonnes for every 95 tonnes produced.” so this sentence isn’t that clear for me as yet. I have a difficulty in getting that 445 figure? Is there another way to look at it and derive that figure? I appreciate your way but if you could just make it a little bit more clearer and understandable then it would be great!

Thanks very much!!!!

On the cost card we expect to input a total of 100 tonnes at a total cost of $340. However because of the standard loss, we expect to produce 100 – 5% = 95 tonnes at a cost of $340.

For the yield variance we compare actual total input (at standard mix and standard cost) with standard total input for actual output (at standard mix and standard cost).

The actual total input was 200+250 = 450 tonnes. At standard mix would have been 180 of X (40% x 450) and 270 of Y (60% x 450).

The standard total input should have been 100 tonnes for every 95 tonnes produced. So for the actual production of 423 tonnes, the total input should have been 100/95 x 423 = 445 tonnes. As standard mix this would have been 178 of X (40% x 445) and 267 of Y (60% x 445).

If you cost both these out at standard costs then the difference between the two is the yield variance.
(There is a bit of rounding obviously, but this is not a problem for the exam)

The standard cost of a certain chemical mixture is as follows:

(MATERIAL ) ( % ) ($/TONNE)
X 40 150
Y 60 190

A standard loss of 5% is accepted in production. The following is actual cost data:

(material) ( tonne) ($/TONNE)
X 200 130
Y 250 215

The total production is 423 tonnes.

Calculate the material yield variance.

Now, I have a difficulty in getting what the standard mix usage should have been for the actual production. I don’t know how to deal with losses. Please guide me through this question, for I’m totally confused and don’t know where to start and where to end and how to get the answer. Please guide.

NB: THE FINAL FORMATTING WHEN SUBMITTED DOESN’T SHOW THE COLUMNS SPACED OUT PROPERLY (DON’T KNOW WHY THIS IS THE CASE BUT THE FIGURES CORRESPOND THE THREE COLUMNS LISTED IN WORDS)
Thanks.

However since Wonder uses cotton in regular production, if we take some from the existing inventory then it means they will have to buy more than they would have for their normal production. (They were expecting to use the existing 5000 in normal production – if we take it for the contract then they have to buy more than they were expecting to.)

If material is used in regular production then always the relevant cost is the current purchased price.

I don’t quite understand how to identify relevant costs when materials are held in inventory. Here’s an example:

Glory Ltd is a supplier of cotton for wonder textiles. Glory sold 5000 kg of cotton in March 2010 at a price of £4 per kg.In May 2010, wonder received a contract for ready made shirts, which would require 8000 kg of cotton which is used regularly in normal production.

The cotton purchased from Glory in the last financial year has not been used in the production process till date and is included in the amount of opening inventory. Glory Ltd has increased it’s selling price by 3% since the last month.

Required:
What will be the relevant cost of materials for the project.

Well, the 5000kg is in inventory and has not been used, so we only need 3000 kg to complete the order so the relevant cost is 3000*4.12 = £12360 but this answer is wrong! Why? The correct answer is (8000*4.12) = £32960 but why should we take 8000 in the first place? We already 5000 materials purchased in inventory, so to complete the order we just need 3000 more to finish the order, so we take 3000. Why take the whole of 8000? Is that breaking the rule that the cost of purchased inventories is a sunk cost?

Please explain. Thanks.

What the examiner is after is that you prove that you know why you are doing things and that you have not simply learned rules. This applies particularly to the written parts.

For example, when the exam has asked for the advantages of activity based costing, too many people simply write that it gives more accurate costings. This means nothing – the total overheads do not change simply because of the way we allocate them between products, and allocating them differently will not itself affect the total profit.
The reason we want more accurate costings is to be able to make better decisions about what selling price to charge, and of course changing the selling price will affect profit. If the cost is higher then we need to charge a higher price. If the cost is lower, then although we will not automatically reduce selling price, it does mean that we can afford to charge a lower price and this might be worth doing if a lower price were to result in more sales.

It is that sort of thing that the examiner is after – not artificially linking topics to performance. If you read the examiners answers you will see what I mean.

PS I am closing this topic. It is not to stop you asking more questions – please do – but because it is now going off the original topic. We want to keep questions relevant to the original topic so that as many as possible can get the benefit of the answers.

<cite>@johnmoffat said:</cite>
No – you should not do parts to different question on the same page.

You can do the parts for one question in any order (so for example you can do part (c) first and then part (a) and so on). But you should start each new question on a new page.
What you should do is do what you can in the time for each part, but leave plenty of blank space so that if you have time later then you can go back and do more for parts that you did not manage to finish.

I do not know what you mean by ‘most examiners suggest…..’. There have only been two examiners for Paper F5, and anyway everything we do in Paper F5 is related to performance management!

In the 15 minutes reading time you should first spend time looking at the requirements of each question (ignoring the text above the requirements) and decide what topics are being tested in each, and therefore which order you intend to attempt the questions.
At the same time you should underline or highlight key requirements (very often there are more than one thing asked for in the same requirement – for example, ‘calculate’ and ‘comment’. Underline them. The reason is that in the pressure of the exam itself it is very common for people to do one of the requirements and then forget about the second. If you have underlined them you are less likely to forget!

If you still have time left out of the 15 minutes you should start making notes on the question paper (you are allowed to write on the question paper). I would not start doing arithmetic (because you then have to copy it out again when you start the exam proper) but just make one word notes of points you would make for the written parts. When the exam starts you can then turn them into proper points.

Thanks a lot, What I meant by examiners (sorry for the wording) was I meant lecturers and tutors. Like, in the LSBF big book of ACCA tips, which can be found on their website for free, the F5 lecturer advises students “Remember that this is a performance management paper. When revising different topics, think about how those areas can be linked to the performance of a company. Also, it is essential to practise questions under exam conditions.” So that was what I was asking – that how can we link the topics to performance? How do we develop the skills? Because that one skill is crucially important to scoring a high mark. I got the same message when I heard the examiner’s approach interview from the ACCA global site. So what does it entail?

Thanks a lot!!!
God bless!

You can do the parts for one question in any order (so for example you can do part (c) first and then part (a) and so on). But you should start each new question on a new page.
What you should do is do what you can in the time for each part, but leave plenty of blank space so that if you have time later then you can go back and do more for parts that you did not manage to finish.

I do not know what you mean by ‘most examiners suggest…..’. There have only been two examiners for Paper F5, and anyway everything we do in Paper F5 is related to performance management!

In the 15 minutes reading time you should first spend time looking at the requirements of each question (ignoring the text above the requirements) and decide what topics are being tested in each, and therefore which order you intend to attempt the questions.
At the same time you should underline or highlight key requirements (very often there are more than one thing asked for in the same requirement – for example, ‘calculate’ and ‘comment’. Underline them. The reason is that in the pressure of the exam itself it is very common for people to do one of the requirements and then forget about the second. If you have underlined them you are less likely to forget!

If you still have time left out of the 15 minutes you should start making notes on the question paper (you are allowed to write on the question paper). I would not start doing arithmetic (because you then have to copy it out again when you start the exam proper) but just make one word notes of points you would make for the written parts. When the exam starts you can then turn them into proper points.

<cite>@johnmoffat said:</cite>
It is unusual for the examiner to give information in the question, but then not to use that information in the answer.
(I can only guess that when the question was originally written, that there were more written parts, but that they were cut out because it was decided that the question was already long enough for the time.)

What you have suggested is very sensible and would have got you credit, provided that you made the point (as the examiner did) that one of the two break-evens assumed that products were sold in the same ratio, the other assuming that products were sold in order of their CS ratios – neither assumption being particularly realistic. Your comments give reason as to why they are not realistic.

All of the exams from F4 onwards are very time-pressured (not just F5), and it is impossible for most people to complete the whole paper in the time. However, it is not the accuracy that gets the marks, it is proving that you know the approach (and can make sensible comments). The important thing is to recognise that you will almost certainly not finish the paper, and therefore to do something for every part of every question. It is better for the marks to hand in 5 questions part finished, than to hand in (say) three questions fully finished, but only three questions. Your target is to get more than 50%. In all questions, the first 50% of the marks come reasonably quickly – it is the remaining 50% that takes up the time. That time is better spend getting the ‘easy’ marks on the other questions.

Thank you very much. But I just wanted to ask, since you suggested that we get the first 10 easy marks in each of the five questions, then on one page can we do randomly the easy question in any order. For example, on one page first start with 1(b) then go on to 2(c) and then 3(a) and then 4(b) and so on just one the same page or we fully have to deal with one question before going to the next main question, like finish whole of question 2 and then go to 3, etc…

Also, most examiners suggest that to get a high pass rate we should link the topics to performance management issues and shows how it applies and helps in the performance management aspect. How can we do this? And what to they actually mean by this?

Finally, what’s your recommend approach for the F5 15 minutes reading time that we are given. How should we must effectively use those reading minutes given?

Thanks