Variance Analysis

They actually purchases 40,400 kg of R, and 19,000 kg of S, so a total of 59,400 kg. Had the mixed correctly, the would have bought 2/3 x 59,400 = 39,600 kg of R, and 1/3 x 59400 = 19,800 kg of S. If you cost out the actual purchases at standard cost, and cost out the correctly mixed purchases at standard cost, then the difference is the mix variance. (Have you watched the free lecture on mix and yield variances? If not then you will find it helpful.)

I have watched your lecture and it was helpful but is the bit when it say two materials R and S in proportion 2:1. - 2/3 and 1/3? I didn't know how to calculate the mix.

how would calculate the total standard mix because I was just given a figure of 2:1?

If the proportion is 2:1, then it means that for every 3 kg bought then 2 kg should be R and 1 kg should be S. So 2/3 of the total purchases should be R and 1/3 of the total should be S.

Answer for this is 800F and these are my answers; Actual total cost: 121,200 + 76000 = $197200 Standard cost for actual production: 60,000 x $11 ((2kg x $4)+ ((1kg+$3)) = $660,000 Therefore Total variance: $462800 (F) Price Variance: Actual purchase at actual cost R: 40400 kg = $121200, S: 19000kg = $76000 = Total $197200 Actual purchase at standard cost R: 40400 kg x$4 = $161600, S: 19000kg x $3 = $57000 = Total $218600 Variance: 21400 (F) Material Mix: Actual total usage at actual mix at std cost: R: 40400 kg x$4 = $161600, S: 19000kg x $3 = $57000 = Total $218600 At std mix at std cost R: 2/3 x 59400 = 39600 x $4 = $158400, S: 1/3 x 59400 = $19800 x $3 = $59400 = Total $217800 Variance: 800(A) Yield variance 59400kg did yield $58800 (60000x0.98 (2% loss)) 59400 should yield (59400kg/3kg $

Answer for this is 800F and these are my answers; Actual total cost: 121,200 + 76000 = $197200 Standard cost for actual production: 60,000 x $11 ((2kg x $4)+ ((1kg+$3)) = $660,000 Therefore Total variance: $462800 (F) Price Variance: Actual purchase at actual cost R: 40400 kg = $121200, S: 19000kg = $76000 = Total $197200 Actual purchase at standard cost R: 40400 kg x$4 = $161600, S: 19000kg x $3 = $57000 = Total $218600 Variance: 21400 (F) Material Mix: Actual total usage at actual mix at std cost: R: 40400 kg x$4 = $161600, S: 19000kg x $3 = $57000 = Total $218600 At std mix at std cost R: 2/3 x 59400 = 39600 x $4 = $158400, S: 1/3 x 59400 = $19800 x $3 = $59400 = Total $217800 Variance: 800(A) Yield variance 59400kg did yield $58800 (60000x0.98 (2% loss)) 59400 should yield (59400kg/3kg) $19800 difference: $39000 x $11 = $429000 (F) What have I done wrong?

Your price variance is correct (21400 favourable) Your mix variance is correct (800 adverse) Your total variance is wrong. To get the standard cost, every 3 kg used should cost $11 ((2 x $4) + (1 x $3)). However 2% should be wasted, and so only 98% should be output. Therefore, every 98% x 3 = 2.94 kg of output should cost $11. So.....the standard cost of the actual production is 60,000 x 11/2.94 = $224,490. Therefore the total variance is 224,490 - 197,200 = $27,290 favourable. Your yield variance is wrong. You can get the same figure in more than one way, but doing it the way that you were trying to: Actual production is 60,000 kg The standard production for the actual input is 59400 x 98% = 58,212. So...they produced 60,000 - 58212 = 1,788 kg more than was expected. At standard cost per kg of production, this is a variance of 1788 x 11/2.94 = $6,690 favourable. As a check - adding the variances together - the total variance is 21400 - 800 + 6690 = 27290 favourable (which is what I calculated earlier). The first line of your question says "Answer for this is 800F and these are my answers". I don't know what answer you are referring to. None of the variances are 800 favourable, and so if that is what it says in whatever book you are looking at then either you have copied the question wrong, or the answer in the book is wrong (and you should query it with them).

Hi Sir I have this question which I need your help on; A company manufacturers a product by mixing three raw materials in a process. The following standards have been set per kg of input to the process. Material: AB123, Standards quantity (kg) 0.40, Standard cost per kg $0.80, Total Standard cost: $0.32 Material: CD234, Standards quantity (kg) 0.25, Standard cost per kg $0.40, Total Standard cost: $0.10. Material: EF456, Standards quantity (kg) 0.35, Standard cost per kg $0.80, Total Standard cost: $0.28. The Standard yield for the process is 80%. The total input to the process in June was 60000 kg and total output from the process was 48800 kg. What is the material yield variance for June? My Answer: The Actual Production is 48800 kg and the standard production for the actual input is 60000 kg x 0.80 = 48000, this mean they produced 48800 - 48000 = 800 kg x 0.70/0.80 = 700 favourable. Is this correct?

Your answer is correct. (There are two ways of getting to the same figure, but what you have done is fine.)