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Hi John
I don’t understand the answer for this question
Standard cost for one cake Ingredients Used
kg $ kg $
Flour 0.1 0.12 per kg 5700 741
Eggs 0.1 0.7 6600 5610
Butter 0.1 1.70 6600 11880
sugar 0.1 0.5 4578 2747
Total 0.4 23478 20978
Normal loss 10% Actual loss
(0.04) (1878)
Standard weight of cake 0.36kg
Standard sales price of a cake £0.85
Standard contribution per cake after all variable costs £0.35Actual output of cake mixture 21600kg
Actual sales price of a cake £0.99All cakes produce must weigh 0.36kg
The budget for production and sales was 50000 cakes. Actual production and sales was 60000 cakes.
Answer:
Actual yield – 60000 cakes
Standard yield (23478:0.4) 58695 cakes
difference 1305 cakes
Standard cost of a cake (W) $0.302
Yield variance (1305×0.302) 394FI am not sure why they don’t take into account loss. They should have used 23478-1878=21600kg:0.4=54000cakes
Can you please explain it to me.
Thanks
OksanaFirst, they are taking account of the loss – the fact that the actual yield is more than the standard yield (i.e. more than they would have expected) means that they have lost less than expected and therefore have a favourable yield variance.
You might find it easier and more logical to calculate the yield variance the way that I do in my free lecture.
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