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Hi, I’m wondering if someone can help me with this question… it’s a material yield variance question with ratios and I have never seen an example like this… I usually use total method to calculate the material yield.. how would I include ratio in the material yield equation?
At the end of period 1, a total material cost variance of $4,900 adverse was correctly recorded for Micra.
The following information relates to Micra for period 1:Std cost per litre. Actual cost per litre. Actual usage
R 63 62 1,900 A
S 50 51 2,800 A
T 45 48 1,300 A
The standard ratio of mixing material R, material S and material T is 30:50:20.
The material price variance for Micra has been correctly calculated as $4,800 adverse. What is the total material yield variance for Micra for period 1?I am a bit puzzled by the letter “A” that you have typed against each of the actual usage figures.
However ignoring that, we know that the total cost variance is $4,900 adverse. The total variance is equal to the price variance + the usage variance, so since the price variance is $4,800 adverse, the usage variance is $100 adverse.We also know that the usage variance is equal to the mix variance + the yield variance.
There is not enough information to be able to calculate the yield variance directly, but we can calculate the mix variance (and then the yield variance is the missing figure).
The mix variance is comparing the actual usage @ standard cost with the actual total usage at std mix @ std cost.
The actual usage @ std cost = (1,900 x $63) + (2,800 x $50) + (1,300 x $45) = $318,200
The actual total usage is 1,900 + 2,800 + 1,300 = 6,000 litres, and so at standard mix is would be
R: 30/100 x 6,000 = 1,800; S: 50/100 x 5,000 = 3,000, and T: 20/100 x 6,000 = 1,200.So at std mix and std cost, the cost would be:
(1,800 x $63) + (3,000 x $50) + (1,200 x $45) = $317,400So the mix variance is 318,200 – 317,400 = $800 adverse.
Therefore the yield variance must be 800 – 100 = $700 favourable 🙂
Have you watched my lectures on mix and yield variances? The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
Hi sir…
I figured it out… the ratio is the percentage of the actual quantity actual mix..
e.g 30% of 6000…
I have watched your lectures but it was the ratios that was making me look at the question difficult.. I have never seen this material yield question like this before… I worked it out using the individual method and not the total… i got -800… I added the variances -6300+ 10000+ -4500= -800
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