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To produce 19 litres of product X, a standard input mix of 8 litres of chemical A and 12 litres of chemical B is required.
Chemical A has a standard cost of $20 per litre and chemical B has a standard cost of $25 per litre.
During September, the actual results showed that 1,850 litres of product X were produced, using a total input of 900 litres of chemical A and 1,100 litres of chemical B.
The actual costs of chemicals A and B were at the standard cost of $20 and $25 per litre respectively.
Based on the above information, which of the following statements is true?
A)Both variances were adverse
B)Both variances were favourable
C)The total mix variance was adverse and the total yield variance was favourable.
DThe total mix variance was favorable and the total yield variance was adverse.
The question above is a ACCA specimen paper question and even after looking at a solution provided it does not make sense to me.Can you please explain ?From the standard cost card, 19 litres should be produced for every 20 litres input.
They actually input 2,000 litres, and so the expected yield is 19/20 x 2,000 = 1,900 litres
They actually produced less than 1,900 so the yield variance is adverse.For every 20 litres input, the mix should be 8 litres of A and 12 litres of B.
The actual total input was 2,000 litres and so the standard mix would be 800 of A and 1,200 of B. They actually input more of A and less of B. Since A costs less per litre that B, this would save money and so the mix variance is favourable.Have you not watched the free lectures on mix and yield variances?
@johnmoffat said:
From the standard cost card, 19 litres should be produced for every 20 litres input.They actually input 2,000 litres, and so the expected yield is 19/20 x 2,000 = 1,900 litres
They actually produced less than 1,900 so the yield variance is adverse.For every 20 litres input, the mix should be 8 litres of A and 12 litres of B.
The actual total input was 2,000 litres and so the standard mix would be 800 of A and 1,200 of B. They actually input more of A and less of B. Since A costs less per litre that B, this would save money and so the mix variance is favourable.Have you not watched the free lectures on mix and yield variances?
Thanks Sir! All clear.
No actually that 19/20 ratio confused me ,concept wise i am ok with variances.
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