Concept explainers
Materials Mix and Yield Variances
Stacy, Inc., produces a product using a process that allows for substitution between two materials, Alpha and Beta. The company has the following direct materials data for its product:
The company had the following results in June:
Required
- a. Compute materials price and efficiency variances.
- b. Compute materials mix and yield variances.
a.
Compute materials price and efficiency variances.
Answer to Problem 30E
The value of materials price variance is $44,000 F, and efficiency variance is $40,000 U for product Alpha, and for product Beta, the materials price variance is $76,000 U, and efficiency variance is $60,000 F.
Explanation of Solution
Materials price variance:
Materials price variance is resultant materials price that has been computed or derived at the end of the accounting period for which the computations are being done.
Efficiency variance:
Efficiency variance is the resultant efficiency that has been computed or derived at the end of the accounting period for which the computations are being done.
Compute the materials price variance:
Particulars | Alpha | Beta |
Materials variance: | ||
Actual | $396,000 | $1,216,000 |
Standard | $440,000 | $1,140,000 |
Materials variance | $44,000 F | $76,000 U |
Table: (1)
Compute the efficiency variance:
Particulars | Alpha | Beta |
Mix variance: | ||
Actual | $440,000 | $1,140,000 |
Standard | $400,000 | $1,200,000 |
Mix variance | $40,000 U | $60,000 F |
Materials yield variance: | ||
Actual | $400,000 | $1,200,000 |
Standard | $400,000 | $1,200,000 |
Materials yield variance | $0 | $0 |
Efficiency variance | $40,000 U | $60,000 F |
Table: (2)
Measure | Alpha | Beta |
AP | $4.50 | $8.00 |
AQ | 88,000 | 152,000 |
SP | $5.00 | $7.50 |
ASQ | 80,000(1) | 160,000 (2) |
SQ | 80,000 (3) | 160,000(4) |
Table: (3)
Working note 1:
Compute the ASQ for alpha:
Working note 2:
Compute the ASQ for alpha:
Working note 3:
Compute the SQ of Alpha:
Working note 4:
Compute the SQ of Beta:
b.
Compute materials mix and materials yield variances.
Answer to Problem 30E
The value of materials mix and materials yield variances of product Alpha are $$40,000 U and $0 respectively, and the value of materials mix and materials yield variances of product Beta $60,000 and $0respectively.
Explanation of Solution
Materials mix variance:
Materials mix variance is the resultant market mix that has been computed or derived at the end of the accounting period for which the computations are being done for two or more than two products.
Materials yield variance:
Materials yield variance is the resultant difference between the cost of finished goods expected from a specific amount of raw material that has been computed or derived at the end of the accounting period for which the computations are being done.
Compute the materials mix variance and materials yield variance for product Alpha and Beta:
Particulars | Alpha | Beta |
Mix variance: | ||
Actual | $440,000 | $1,140,000 |
Standard | $400,000 | $1,200,000 |
Mix variance | $40,000 U | $60,000 F |
Materials yield variance: | ||
Actual | $400,000 | $1,200,000 |
Standard | $400,000 | $1,200,000 |
Materials yield variance | $0 | $0 |
Table: (4)
Measure | Alpha | Beta |
AP | $4.50 | $8.00 |
AQ | 88,000 | 152,000 |
SP | $5.00 | $7.50 |
ASQ | 80,000(1) | 160,000 (2) |
SQ | 80,000 (3) | 160,000(4) |
Table: (5)
Thus, the value of materials mix and materials yield variances of product Alpha are $$40,000 U and $0 respectively, and the value of materials mix and materials yield variances of product Beta $60,000 and $0respectively.
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Chapter 17 Solutions
Fundamentals Of Cost Accounting (6th Edition)
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