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Mr. Green makes salads. The standard plate of salad has 30 g of lettuce (L), 50 g of peppers
(P) and 80 g of beetroot (B). The standard prices of the three ingredients are $0.2/kg,
0.4/kg and 0.8/kg respectively. The actual prices were $0.22/kg, $0.38/kg and $0.82/kg.
Mr. Green has been experimenting and so in July he changed the mix of vegetables on the
plate thus: 1,500 plates contained 62,000 grams of lettuce, 81,000 grams of peppers and
102,000 grams of beetroot.What is the cost difference between the actual mix and the standard mix (to the nearest
cent)?Answer: $11.59
AQAM AQSM Difference Standard Variance
Kgs Kgs Kgs $/kg $
Lettuce 62 45.94 –16.06 0.22 –3.53 A
Peppers 81 76.56 –4.44 0.38 –1.69 A
Beetroot 102 122.50 20.50 0.82 16.81 F
Material Mix variance 11.59 FSorry…. i will create new topic next time. Back to the question, how to get the $0.63
Past year question SepDec 2019 Q32(a)(ii)(iii), the model answer shows a separate working between inventory management costs and purchase price. I do read the examiner’s report saying that there is a change in inventory level and would change the cost of financing working capital and the inclusion of the cost of overdraft rate at 3%. The examiner’s report say this is the common mistakes faced by candidates. But why this workings/principle do not apply in PYQ Sep2016 Q31 as there is a change in inventory level and inclusion of overdraft rate at 4%.
May i know which one is true or the differences between this 2 questions.
Thanks for the explanation!
I have another question.
If question requirement need us to calculate a nominal NPV and also real NPV.
Since the general rate of inflation is given, do we deflate ‘cash before tax’ or ‘net cashflow’?I am confused about this because in the latest exam (MarchJune2019,Q32 Pinks Co) deflate the profit before tax BUT in Dec 2013 Q1 Darn Co deflate the net cashflow.
