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JC Ltd mixes three materials to produce chemical SGR. The following extract from a standard cost card shows the materials to be used in producing 100kg of chemical SGR
Material A = 50kg @ $10 per kg
Material B = 40kg @ $5 per kg
Material C = 20kg @ $9 per kg
Total of 110kgIn October 23,180kg of SGR were produced using the following materials
A = 13,200kg
B = 7,600kg
C = 5,600kg
Total of 26,400kgWhat is the total material yield variance?
The answer got $7,216 and I don’t understand their approach.
There are several approaches you can use – but they all give the same answer.
Have you tried the approach that I go through in my free lecture, which I find the easiest and most logical approach?
Compare what they should have used for the actual production (i.e. 23,180 x 110/100 = 25,498kg), at standard mix and costed at standard cost, with the total of 26,400 kg that they did use, at standard mix and standard cost.
Ha! I did actually use yours, but I was confused when I saw 100kg. Could you please explain why we’re dividing 110kg/100kg?
I am thinking since we’re producing 100kg, which will use 110kg of all three materials, then surely, each kg of SGR to be produced must contain an average of 1.1kg (110kg/100kg) of all three materials.
Is my understanding correct sir?
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