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Hi Frank,
If you check both my answers you will see the solutions there. I got confused and calculated the yield twice and put it as usage in the first response.
To your question: Yes they add up because the USAGE variance 763 F can be broken down to MIX + YIELD (1100 A + 1863 F)
and the TOTAL variance is PRICE + USAGE (7250 A + 763 F = 6487 A)If you calculate the TOTAL on its own without breaking it down to any of its components then it goes something like this:
The 92070 litres of lubricant produced would take 92070/9 (which is what 5+5 litres of P and Q produce) = 10230 x 5 litres of P/Q (since we are lucky to have a 5:5 or 1:1 mix) = 51150 of each. Another way of looking at it is 51150+51150 = 102300 x 90% (which the yield rate as Gabriel points out initially) = 92070 litres of lubricant. I know it may be a bit confusing but you have to keep in mind that 5+5 litres produce 9 litres output. In other words it is not the standard approach where you have x+y litres producing 1 unit of output. If you understood that then we can proceed:
So 92070 litres of lubricant would take 51150 P and 51150 Q which would cost 51150*0.7= £35805 plus 51150*0.92 = £47058. Consequently the total cost of P+Q to produce 92070 litres of lubricant SHOULD BE 35805+47058 = £82863
BUT it took 45000 P and 55000 Q costing 36000 + 53350 respectively = £89350So it costed us to more produce 92070 litres of lubricant (£89350) than it should have costed us £82863 so the total variance is adverse 89350 – 82863 = £6487 A.
As you can realise from the narrative of the calculation it is a combination of usage (102300 litres total vs 45000+55000 = 100000 litres in total) and price (51150*0.7 + 51150*0.92 = 82863 vs 36000+53350=89350 actual total costs.
This is why price + usage variance will add up to the total variance.
Usage though can be broken down even further to mix and yield as we have a combination of 2 components and mix + yield variance will add up to the usage variance.The main point to commend is that even though we paid more than we should we had a better yield (1863 F). This indicates that we bought a better quality of materials. Given that the mix variance is adverse we also have mixed the materials in different way using less P and more Q which also helped to the end result of higher output.
I hope it is clear now
Good lucksorry TWO correctionS
USAGE
P 51150 45000 6150F @ 0.7 = 4305F
Q 51150 55000 3850A @ 0.92 =3542ATOTAL 763F
OR MIX+YIELD 1100 A + 1863 F = 763F as per my previous response
TOTAL
P 51150 @0.7 = 35805
Q 51150 @ 0.92 = 47058TOTAL AT STD COST = 35805 + 47058 = 82863
ACTUAL COST P 36000 + Q 53350 = 89350
VARIANCE 89350-82863 = 6487 A
OR PRICE+USAGE = 7250 A* – 763 F = 6487 A
* see PRICE in my previous answerI think it is ok now! I have calculated the yield variance twice in my previous response and labeled it usage…OOPS sorry.
I hope you can figure it out with this correction and get over my confusion…
All the best of luck for Monday
CheersI think it is the usage/YIELD variance in your book’s solution:
USAGE
100,000 should produce 90,000
but produced 92,070
which means 2,070 F /9 litres of lubricant unit = 230 x 5 litres of P/Q = 1150 litres of each*
which means 1150 x 0.7 = 805 for P
and 1150 x 0.92 = 1058 for Q
total 1863 F
* or to put it another way 1150 litres of P + 1150 litres of Q = 2300 X 90% (as you point out) = 2070MIX actual @std mix actual@ actual mix variance price total
P 50,000 litres 45000 litres 5000 F 0.7 3500 F
Q 50,000 litres 55000 litres 5000 A 0.92 4600 A
T 100,000 100,0000 – 1100 AYIELD std@std mix actual@std mix variance price total
P 51150** 50000 1150 F 0.7 805 F
Q 51150** 50000 1150 F 0.92 1058 F
T 102300 100000 2300 F 1863 F** 92070/9=10230 X5 litres=51150 In other words it would take 51150 litres of each material to produce the 92070 litres of lubricant
PRICE
P 45000X0.7 = 31500 – 36000 = 4500A
Q 55000X0.92 = 50600 – 53350 = 2750A
TOTAL 7250 AI am not sure this is correct but I hope it helps
@hampine said:
english please so that we can all understandSorry mate! We felt a little homesick….I think we posted all we could remember from the paper….
@valiaty said:
haha , den menw athina, Larisa menw. Imun Londino kai katevika na dwsw gia to Acca.. anapodi egw.. 😛 esu ti kaneis ekei?A…edo eisai ki esy…!!! Ante na mazeuomaste giati den ta vlepo kala kato …pame gia mpraff to xronou …. 90-10 to vlepo….
vrika douleia edo konta sto Leeds kai ksekinisa to ACCA…..
Esy me mperdepses….poses eisai?…mia sto londino mia sti Larissa..mia Athina…ti treli poreia einai auti??? poly endiaferon gia na gineis logistria…No Leeds. Do you mean Athens Greece??? ..I happen to be Greek….
I wish you all the best of luck…..
4 questions was all I managed to complete so I need at least 12.5 marks on average per question to pass which seems a bit too much to ask for….
…if I have to resit in June then I hope none of you joins me…
Cheers….I calcuated a different bit on Variances and started on the wrong side
but for the 20% slowdown and 5% cut I worked out (24,000/2*1.2) =14,400 revised hours. 6-5% for 0.5hrs was 5.7*2=11.4. Coincidently when one devides 136800 actual labour costs by 12000 actual hrs worked it comes to 11.4 which seems right since there was no idle time…..
I screwed up the order though and instead of going from planning to operational and then to actual at STD cost I did it the other way around…
…anyway …as I said…back in June….