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August 10, 2016 at 1:15 pm #332516veselinnachristova
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Hello.
The following question is from my Kaplan Exam Kit:
JC Ltd mixes three materials to produce chemical SGR. The following extract from a standard cost card shows the materials to be used in producing 100 kg of chemical SG:
Material A: 50 kg @ $10/kg
Material B: 40 kg @ $5/kg
Material C: 20 kg @ $9/kg
Total Kgs: 110During October 23,180 kg of SGR were produced using the following materials:
Material A: 13,200 kg
Material B: 7,600 kg
Material C: 5,600 kg
Total Kgs: 26,400Required:
a) What is the total material yield variance?
b) What is the total material mix variance?The way I answered the question is as follows:
a) Material Yield Variance = SQSP – AQ(Standard Mix)SP
Standard Mix:
Material A: 50kg/110kg = 45%
Material B: 40kg/110kg = 36%
Material C: 20 kg/110kg = 19%SQSP (A) = (23,180 kg x 100/110) x 45% x $10 = $94,827
SQSP (B) = (23,180 kg x 100/110) x 36% x $5 = $37,931
SQSP (C) = (23,180 kg x 100/110) x 19% x $9 = $36,034
Total = $168,792AQ(SM)SP (A) = 23,180 kg x 45% x $10 = $104,310
AQ(SM)SP (B) = 23,180 kg x 36% x $5 = $41,724
AQ(SM)SP (C) = 23,180 kg x 19% x $9 = $39,638
Total = $185,672Material Yield Variance = $168,792 – $185,672 = $16,880 Adv. (And voilà! The correct answer must be $7,216 Adv 🙂 )
b) Material Mix Variance = AQ(SM)SP – AQSP
Total AQ(SM)SP (as above) = $185,672
AQSP (A) = 26,400 kg x $10 = $264,000
AQSP (B) = 26,400 kg x $5 = $132,000
AQSP (C) = 26,400 kg x $9 = $237,600
(it just doesn’t seem right… The answer is $9,200 Adv)I really, really need help, because I have the feeling that the question is not so difficult, but as you can clearly see, I cannot answer correctly.
Thank you!
August 10, 2016 at 2:50 pm #332534John MoffatKeymaster Topics: 57
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In the yield variance, you should have multiplied by 110/100 to get the standard mix (not by 100/110).
I suggest that you watch my free lectures on mix and yield variances (and I do think it is very dangerous to simply learn formulae for the variances – the examiner deliberately sets questions that test that you understand and have not just learned rules).
(Our lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.)
August 12, 2016 at 8:09 am #332810veselinnachristova Topics: 2
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Thank you!
August 12, 2016 at 4:28 pm #332868John MoffatKeymaster Topics: 57
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You are welcome 🙂

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