Kaplan kit question FERTICOM (VARIANCES)

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  • Profile photo of abdulwahabsiddiq

    The standard rate of material per kg used in calculating contribution is 144/32.
    and the rate per kg used in yield is 144/35. why there is a conflict? IS there a mistake or this is correct if this is correct whats the logic behind it?

    Profile photo of John Moffat
    John Moffat

    It is correct, and it is because the yield variance is checking whether or not the right quantity was purchased for the amount of output.
    We compare the actual total purchases with the amount we should have purchased for the production (i.e. 35/32 x the production).
    Because we are looking to see whether we have bought too much or too little, we cost out at the cost per kg of what it bought. On the cost card the cost is $144 for purchase of 35kg – i.e. 144/35 per kg bought.

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