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- November 30, 2021 at 2:40 am #642051
To produce 19 literes of product x, standard input mix of 8 literes of chemical A and 12 literes of chemical B is required. Chemical A has a standard cost of $20 per liter and chemical B has a standard cost of $25 per liter.

During September, the actual results showed that 1,850literes of product x were produced, using a total input of 900literes of chemical A and 1,100 literes of chemical B.

The actual costs of chemical A and B were at the standard cost of $20 and $25 per liter respectively.

Answer: The yield is Adverse and = 1220I understand the yield is for every 20 litres of total input, they should get 19 litres of output.

The actual total input was 2,000 litres (900 + 1100) and so they should get output of 19/20 x 2000 = 1900 litres.

The actual output was only 1850 litres and so the yield variance (-50) is adverse.

However, I really dont know how to arrive 1220. I calculated: with 19 kg at yield they paid 460usd (8*20+12*25), so 1kg of yield costs: 24.21usd, therefore, 50kg difference cost: 1210usd. The answer is 1220, can you help to advise where I am wrong?

Thank you very much, sir!

November 30, 2021 at 8:27 am #642068The answer is $1,210 (not $1,220) and the difference is due to rounding which is irrelevant in the exam.

I find it easier and more logical to do it the way that I show in my free lecture on mix and yield variances.

They actually input a total of 2,000 litres. If it had been at standard mix then 8/20 x 2,000 = 800 would have been A, and 12/20 x 2,000 = 1,200 would have been B. At standard cost this would have cost a total of $46,000.

For the actual production of 1,850 units, they should have used 8/19 x 1850 = 778.95 of A, and 12/19 x 1850 = 1168.42 of B. (A total of 20/19 x 1850 = 1947.37)

At standard cost this would have cost a total of $44,790Therefore the variance is 46,000 – 44,790 = $1,210.

November 30, 2021 at 1:52 pm #642091Thank you very much sir,

I have watched all your lectures, always find easy to understand, but related to variance, especially the yield, when I work on actual questions, I got confuses as different text books have different approaches, and sometime different answers as in this case.

I hope that the examiners will take the result as long as it follows the methodology.Thank you very much again for all your wonderful lectures and efforts to help us. 😀

November 30, 2021 at 4:13 pm #642117Whenever there are different methods of doing any calculation then they are always accepted by the markers.

As far as the difference here is concerned it is purely due to rounding, and rounding such as this never loses any marks.

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