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There is this question with losses inside and I have no idea on how to find the materials yield variance, for it is not as straightforward as to the example I saw in the lecture. Here’s the question:
The standard cost of a certain chemical mixture is as follows:
(MATERIAL ) ( % ) ($/TONNE)
X 40 150
Y 60 190A standard loss of 5% is accepted in production. The following is actual cost data:
(material) ( tonne) ($/TONNE)
X 200 130
Y 250 215The total production is 423 tonnes.
Calculate the material yield variance.
Now, I have a difficulty in getting what the standard mix usage should have been for the actual production. I don’t know how to deal with losses. Please guide me through this question, for I’m totally confused and don’t know where to start and where to end and how to get the answer. Please guide.
NB: THE FINAL FORMATTING WHEN SUBMITTED DOESN’T SHOW THE COLUMNS SPACED OUT PROPERLY (DON’T KNOW WHY THIS IS THE CASE BUT THE FIGURES CORRESPOND THE THREE COLUMNS LISTED IN WORDS)
Thanks.There are several ways of calculating the yield variance (all obviously giving the same answer!).
To avoid confusion I will do it the same was as in my lecture (and in our course notes).On the cost card we expect to input a total of 100 tonnes at a total cost of $340. However because of the standard loss, we expect to produce 100 – 5% = 95 tonnes at a cost of $340.
For the yield variance we compare actual total input (at standard mix and standard cost) with standard total input for actual output (at standard mix and standard cost).
The actual total input was 200+250 = 450 tonnes. At standard mix would have been 180 of X (40% x 450) and 270 of Y (60% x 450).
The standard total input should have been 100 tonnes for every 95 tonnes produced. So for the actual production of 423 tonnes, the total input should have been 100/95 x 423 = 445 tonnes. As standard mix this would have been 178 of X (40% x 445) and 267 of Y (60% x 445).
If you cost both these out at standard costs then the difference between the two is the yield variance.
(There is a bit of rounding obviously, but this is not a problem for the exam)<cite> @johnmoffat said:</cite>
There are several ways of calculating the yield variance (all obviously giving the same answer!).
To avoid confusion I will do it the same was as in my lecture (and in our course notes).On the cost card we expect to input a total of 100 tonnes at a total cost of $340. However because of the standard loss, we expect to produce 100 – 5% = 95 tonnes at a cost of $340.
For the yield variance we compare actual total input (at standard mix and standard cost) with standard total input for actual output (at standard mix and standard cost).
The actual total input was 200+250 = 450 tonnes. At standard mix would have been 180 of X (40% x 450) and 270 of Y (60% x 450).
The standard total input should have been 100 tonnes for every 95 tonnes produced. So for the actual production of 423 tonnes, the total input should have been 100/95 x 423 = 445 tonnes. As standard mix this would have been 178 of X (40% x 445) and 267 of Y (60% x 445).
If you cost both these out at standard costs then the difference between the two is the yield variance.
(There is a bit of rounding obviously, but this is not a problem for the exam)Thank you for you for your reply. However, just to make sure (I still have a problem on how to get the standard total input of 445 tonnes, so could you clarify this further). You said “the standard total input should have been 100 tonnes for every 95 tonnes produced.” so this sentence isn’t that clear for me as yet. I have a difficulty in getting that 445 figure? Is there another way to look at it and derive that figure? I appreciate your way but if you could just make it a little bit more clearer and understandable then it would be great!
Thanks very much!!!!
I am sorry, but for that bit of the problem there is not really any other way.
From the cost card, to produce 95 tonnes you expect to use 100 tonnes of material (because 5% of the 100 are expected to be lost).
Perhaps a bit of algebra will help you. If you put in x tonnes of material then you expect to lose 0.05x and to produce 0.95x.
We actually produced 423 tonnes. So 0.95x = 423
So the totaal material we should have used x=423/0.95 = 445 tonnes.<cite> @johnmoffat said:</cite>
I am sorry, but for that bit of the problem there is not really any other way.From the cost card, to produce 95 tonnes you expect to use 100 tonnes of material (because 5% of the 100 are expected to be lost).
Perhaps a bit of algebra will help you. If you put in x tonnes of material then you expect to lose 0.05x and to produce 0.95x.
We actually produced 423 tonnes. So 0.95x = 423
So the totaal material we should have used x=423/0.95 = 445 tonnes.I get it know thanks very much!!! God bless.
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