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Question number 183 page 64 in the practice kit for (sep 2021 exam to june 22)
Ans given was 700 fav
I understand the concepts but I am bit confused in the adverse and fav calculations
Total mat cost=price +usage
4900A= 4800A+ usage
Usage = 4900A-4800A
Usage = 100 A
Total usage = mix + yield
100A = 800A+ yield
Yield =700 A
I think 700 A but the answer was 700 F can you please help me to get the ans correct
An adverse variance is negative.
The yield variance = total usage – mix
So yield = -100 – (-800)
Subtracting a negative number is the same as adding the number, so:
yield = -100 + 800 = +700 (and a positive variance is a favourable variance).
Alternatively, had the yield variance been 700 adverse, then having a mix variance of 100 adverse would mean then when you added the two together you would end up with a total variance of 800 adverse, which obviously is not correct 🙂