Price, Mix, and Yield Variances
The chocolate manufacturing operation of confectioners Inc,
require close control of daily production and cost data. The
computer printout for a batch of one ton of cocoa powder
indicates the following material standards:
Ingredients
Cocoa beans
Milk
Sugar
Total batch
Quantity
(pounds)
800
3,700
500
5,000
unit cost
$0.60
0.5
0.4
Standar
Batch Cost
$ 480
1,850
200
2,530
On December 7, the company commodity accounting analysis
section reported the following production and cost data for the
December 6 operations:
Ingredients Put
In Process
Cocoa beans
Milk
Sugar
Total batch
Actual
quantity
325,000
1,425,000
250,000
2,000,000
x
actual
unit price =
$0.62
$0.48
0.39
actual
total cost
$201,500
684,000
97,500
983,000
Cocoa powder transferred to finished goods inventory totaled
387 tons. There was no work in process inventory.
Required:
Compute the materials price, mix, and yield variance, and
indicate whether each is favorable or unfavorable.
Answer:
Materials price variance:
Actual
Standard
Quantity Cost
Standard
Actual
Materials
Ingredients (lbs.)
per Lb.
Cost
Cost
Price Variance
Cocoa beans$ 325,000 $0.60 $ 195,000 $201,500 $ 6,500 unfav.
Milk
1,425,000 $0.50
712,500
684,000 (28,500)fav.
Sugar
250,000 $0.40
100,000
97,500 (2,500)fav.
$1,007,500 $983,000 (24,500)fav.
Materials mix variance:
Formula
Actual
for Actual
Standard
Quantity Cost
Difference Cost
Materials
Ingredients (lbs.)
(Lbs.)*
in Lbs.
per Lb. Mix Variance
Cocoa beans$ 325,000 $ 320,000 $5,000 $0.60 $3,000 unfav.
Milk
1,425,000 $1,480,000 (55,000) 0.50 (27,500)fav.
Sugar
250,000 $ 200,000
50,000
0.40 20,000)unfav.
2,000,000 $2,000,000
0
($4,500)fav.
Cocoa beans = (800/5000) x 2,000,000 = 320,000
Milk = (3,700/5,000) x 2,000,000 = 1,480,000
Sugar = ( 500/5,000) x 2,000,000 = 200,000
Materials yield variance :
Expected yield: 2,000,000 lbs. input/5,000 lbs
Actual yield in one-ton batches …………………
Unfavorable yield in batches …………………….
Standard cost per one-ton batch ………………
Materials yield variance …………………………….
= 400
= 387
= 13
$2,530
$32,890unfav.