A mix of three materials into a process produces 0.9 litres of a finished product, with 10% loss of in put in the process. Standard material cost are as follows per 0.9 litres of output.
Material $
X 0.5 litres at $2 per litre. 1.00
Y. 0.4. Litres at $ 1.5 per litre. 0.60
Z 0.1 Litres at $ 4 per litre. 0.40
During a control period, 4000 litres of output were produced. These used 2,810 litres of Material X, 1910 litres of Material Y, and 380 litres of Material Z
Yield variance ?
Answer
Litres of input
4000 litres of output require (* 10/9) 4444.44
They did require 5100.00
Yield variance in litres of input material. 666.56 (A)
Standard weighted average price per litre of input $2
Yield. Variance. $ 1311(A)
THIS ANSWER ARE CALCULATED THE YIELD IN TERM OF LITRES INPUT , COULD YOU PLEASE HELP ME HOW TO CALCULATE THIS IN TERM OF LITRES OF OUT PUT
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Yield variance
10y ago#1But why? The answer is correct!
Have you watched my free lectures on mix and yield variances?
Yes sir, I have watched all of your videos. I have got the answer following the method demonstrated by you. However, I was wondering why I am not getting the Same correct answer using the other method. I shall be grateful if you could kindly guide me where I am making the error in the following solution.
Thanks
5001 should Yield (5001/(10/9)- 4500.9
They did yield. 4000
500.9
*$2
1001.8
I think you should use Std. Material cost per unit if you calculate material yield variance based on input..
Here it is,
5100kg of materials should have yielded (5100*90/100) = 4590
But did yield = 4000
Variance in units = 590
* Std. Material cost per unit (2/0.9) = 2.22
Variance in $ = $1311
I think we should arrive at unit cost dividing total cost of input by expected output which is 0.9kg in this example. By doing so we absorbed the cost of 0.1kg- which is the normal loss - into production cost. That's what we did in F2 when we do 'Process Costing'..
I think this is the reason. Sir please correct me if I'm wrong :-)
10y ago#4There are two ways of getting the same answer.
The alternative is as follows:
The standard cost of the actual total input (5,100) at standard mix is:
X: 0.5 x 5,100 = 2,550 x $2 = 5,100
Y: 0.4 x 5,100 = 2,040 x $1.5 = 3,060
Z: 0.1 x 5,100 = 510 x $4 = 2,040
Total: $10,200
The standard total input for the actual output of 4,000 = 1/0.9 x 4,000 = 4,444.4
X: 0.5 x 4,444.4 = 2,222.2 x $2 = 4,444.4
Y: 0.4 x 4,444.4 = 1,777.8 x $1.5 = 2,666.7
Z: 0.1 x 4,444.4 = 444.4 x $4 = 1,777.6
Total: $8,888.7
Yield variance = the difference = 10,200 - 8,888.7 = $1,311.3
Thank you so much John and thank you thiran your point also helpful
10y ago#6You are welcome :-)
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