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There is this question with losses inside and I have no idea on how to find the materials yield variance, for it is not as straightforward as to the example I saw in the lecture. Here’s the question:
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.The following is merely an attempt to help find a solution:
40%x = 150 / 0.4x = 150
60%x = 190/ 0.6x = 190Subtract to find x:
0.2x = 40
x = 200 (The number of tonnes in a standard mix)200 * 40% = 80 (Number of tonnes for X in standard mix)
200 * 60% = 120 (Number of tonnes for Y in standard mix)$150/80 = $1.88(Standard Cost for X)
$190/120 = $1.58(Standard Cost for Y)Price/Expenditure Variance:
Actual Purchases @ Actual Cost Actual Purchases @ Standard Cost
Tonnes $ Tonnes $
X 200 130 200 376
Y 250 215 250 395
= 450 345 = 450 771Price Variance: 771 – 345 = 426 (F)
X: 246 (F)
Y: 180 (F)Mix Variance:
Actual Total Usage:
@ Actual Mix @ STD Mix
@ STD Mix @ STD Cost
Tonnes $ Tonnnes $
X 200 376 (40%) 180 (*$1.88) 338.4
Y 250 395 (60%) 270 (*$1.58) 426.6
= 450 771 = 450 765Mix Variance: 765 – 771 = $6 (A)
X: $37.6
Y: $31.6Yield Variance:
Actual Total Usage:
@ STD Mix @ STD Mix
@ STD Cost @ STD Cost
Tonnes $ Tonnes $
X 180 338.4 (40%) 80 (*$1.88) 150.4
Y 270 426.6 (60%) 120 (*$1.58) 189.6
= 450 765 = 200 340Yield Variance: 340 – 765 = $425 (A)
X: 188 (A)
Y: 237 (A)450 * 95% = 427.5
427.5 – 423 = 4.5 (Tonnes of loss we have not accounted for)
I think we can ignore this when calculating Material Yield Variance.Price/Expenditure Variance could be adjusted for the loss under Actual Purchases at Actual Cost in which case the Price Variance will be higher but this shouldn’t affect Yield Variance.
<cite> @dreamersk said:</cite>
Price/Expenditure Variance could be adjusted for the loss under Actual Purchases at Actual Cost in which case the Price Variance will be higher but this shouldn’t affect Yield Variance.Sorry. I mean the Actual Purchases @ Actual Cost will be higher and the Price Variance will be lower.
My answer is wrong I can’t delete it. Can someone help or is there information missing?
This is my 2nd and final attempt…please check
Mix Variance:
Actual Total Usage:
@ Actual Mix @ STD Mix
@ STD Cost @ STD Cost
Tonnes $/Tonne Tonnes $/Tonne
X 200 *$150= 30 000 (40%) 180 *$150= 27 000
Y 250 *$190= 47 500 (60%) 270 *$190= 51 300
= 450 77500 450 78300Yield Variance:
Actual Total Usage: STD Total Usage:
@ STD Mix @ STD Mix
@ STD Cost @ STD Cost
Tonnes $/Tonne Tonnes $/Tonne
X (40%) 180 *$150= 27 000 (40%) 169.20 *$150= 25380
Y (60%) 270 *$190= 51 300 (60%) 253.80 *$190= 48222
= 450 78300 423 7360273602 * 0.95 = $69921.9(5% loss accepted)
Yield Variance: 78 300 – 69 921.9 = $8378.1 (A)
X: 24 111(25 380*0.95) (A)
Y: 45 810.9(48 222*0.95) (A)
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