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Gleim / Flesher CMA Review
15th Edition, 1st Printing
Part 1 Updates
Available December, 2010
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Study Unit 7 – Cost and Variance Measures
Top of page 333: This presents the mix and yield variances in a more useful format.
7.5 MIX AND YIELD VARIANCES
1. In some production processes, inputs are substitutable, e.g., a baker of pecan pies may use
pecans from Florida rather than from Georgia as market conditions shift.
a. The use of substitutable ingredients allows the quantity/efficiency variance for both direct
materials and direct labor to be broken down into two components, a mix variance and a
yield variance.
2. To enable the calculation of the mix and yield variances, the weighted-average expected price
(WAEP) and weighted-average standard price (WASP) must be derived.
a. EXAMPLE: A retail store is budgeting its employee hours for the upcoming month and
calculates its weighted-average standard wage rate (WASP) as follows:
Budgeted
Hours
(SQ)
Managers:
200
Sales associates: 800
Warehouse:
600
Totals
1,600
Standard
Wage
(SP)
x
x
x
$22
14
8
Subtotals
=
=
=
$ 4,400
11,200
4,800
$20,400
WASP = $20,400 ÷ 1,600 hours = $12.75 per hour
After month-end, the store determines that the actual hours worked were slightly different.
This information can be used to calculate the WAEP as follows:
Actual
Hours
(AQ)
Managers:
220
Sales associates: 800
Warehouse:
480
Totals
1,500
Standard
Wage
(SP)
x
x
x
$22
14
8
Subtotals
=
=
=
$ 4,840
11,200
3,840
$19,880
WAEP = $19,880 ÷ 1,500 hours = $13.2533 per hour
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Page 2 of 9
3. The mix variance measures the relative usage of higher-priced vs. lower-priced inputs in the
production process.
Mix variance = ATQ × (WASP – WAEP)
a. EXAMPLE: The store calculates its labor mix variance as follows:
Labor mix variance =
=
=
=
ATQ × (WASP – WAEP)
1,500 hours × ($12.75 – $13.2533)
1,500 hours × –$0.5033
$755 unfavorable
This unfavorable variance resulted from the more expensive managers working more hours
and the less expensive warehouse employees working fewer hours than were budgeted.
4. The yield variance measures how efficiently the actual mix of inputs was used to produce the
given level of output.
Yield variance = (STQ – ATQ) × WASP
a. EXAMPLE: The store calculates its labor yield variance as follows:
Labor yield variance =
=
=
=
(STQ – ATQ) × WASP
(1,600 hours – 1,500 hours) × $12.75
100 hours × $12.75
$1,275 favorable
This favorable variance resulted from the store using fewer hours than budgeted to achieve
its output for the month. The sum of the mix and yield variances is the efficiency variance
($755 U + $1,275 F = $520 F).
5. The same formulas can be applied to the mix and yield variances for direct materials.
Middle of page 342: This brings the Core Concepts in line with the mix and yield variance formulas.
Mix and Yield Variances
■ The quantity variance for materials and the efficiency variance for labor can be further
subdivided into mix and yield variances:
Mix variance = AQ × (A% – S%) × SP ATQ × (WASP - WAEP)
Yield variance = (SQ × S% × SP) – (AQ × A% × SP) (STQ - ATQ) × WASP
Beginning on the top of page 357: The following six pages replace the pages currently in your book.
The solutions for these questions employ easier formulas for the mix and yield variances.
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357
SU 7: Cost and Variance Measures
7.5 Mix and Yield Variances
Questions 42 and 43 are based on the following information.
Mack Fuels produces a gasoline additive. The standard
costs and input for a 500-liter batch of the additive are
presented below.
Chemical
Echol
Protex
Benz
CT-40
Totals
Standard
Input Quantity
in Liters
200
100
250
50
600
Standard
Cost
per Liter
$.200
.425
.150
.300
Total Cost
$ 40.00
42.50
37.50
15.00
$135.00
42. What is Mack’s direct materials mix variance for
this operation?
A. $294.00 favorable.
B. $388.50 favorable.
C. $94.50 unfavorable.
D. $94.50 favorable.
The quantities purchased and used during the current period
are shown below. A total of 140 batches were made during
the current period.
Chemical
Echol
Protex
Benz
CT-40
Totals
Quantity
Purchased
(Liters)
25,000
13,000
40,000
7,500
85,500
Total
Purchase
Price
$ 5,365
6,240
5,840
2,220
$19,665
Quantity
Used
(Liters)
26,600
12,880
37,800
7,140
84,420
Answer (B) is correct. (Publisher, adapted)
REQUIRED: The direct materials mix variance.
DISCUSSION: To enable the calculation of the mix
variance, the weighted-average expected price (WAEP) and
weighted-average standard price (WASP) must be derived.
Mack can calculate its WAEP and WASP for the month as
follows:
Middle
Chemical
AQ
SP
Budget
Echol
26,600 × $0.200 = $ 5,320
Protex
12,880 × 0.425 =
5,474
Benz
37,800 × 0.150 =
5,670
CT-40
7,140 × 0.300 =
2,142
Totals
84,420
$ 18,606
Divided by: total liters
÷ 84,420
WAEP per liter
$0.22040
To calculate WASP, the total standard quantity of each input
must first be derived: Echol (200 liters × 140 batches = 28,000
total), Protex (100 liters × 140 batches = 14,000 total), Benz
(250 liters × 140 batches = 35,000 total), and CT-40 (50 liters ×
140 batches = 7,000 total).
Static
Chemical
SQ
SP
Budget
Echol
28,000 × $0.200 = $ 5,600
Protex
14,000 × 0.425 =
5,950
Benz
35,000 × 0.150 =
5,250
CT-40
7,000 × 0.300 =
2,100
Totals
84,000
$ 18,900
Divided by: total liters
÷ 84,000
WASP per liter
$0.22500
The mix variance can now be calculated:
Materials mix variance =
=
=
=
ATQ × (WASP – WAEP)
84,420 liters × ($0.22500 – $0.22040)
84,420 liters × –$0.0046
$388.50 favorable
Answer (A) is incorrect. The quantity variance is $294.00
favorable. Answer (C) is incorrect. The yield variance is $94.50
unfavorable. Answer (D) is incorrect. The yield variance
reversed is $94.50 favorable.
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358
SU 7: Cost and Variance Measures
43. What is Mack’s direct materials yield variance for
this operation?
A. $294.00 favorable.
B. $388.50 favorable.
C. $94.50 unfavorable.
D. $388.50 unfavorable.
Answer (C) is correct. (Publisher, adapted)
REQUIRED: The direct materials yield variance.
DISCUSSION: To enable the calculation of the yield
variance, the weighted-average standard price (WASP) must be
derived. Mack can calculate its WASP for the month as follows:
Static
Chemical
SQ
SP
Budget
Echol
28,000 × $0.200 = $ 5,600
Protex
14,000 × 0.425 =
5,950
Benz
35,000 × 0.150 =
5,250
CT-40
7,000 × 0.300 =
2,100
Totals
84,000
$ 18,900
Divided by: total liters
÷ 84,000
WASP per liter
$0.22500
The yield variance can now be calculated:
Materials yield variance =
=
=
=
(STQ – ATQ) × WASP
(84,000 liters – 84,420 liters) × $0.22500)
–420 liters × $0.22500
$94.50 unfavorable
Answer (A) is incorrect. The quantity variance is $294.50
unfavorable. Answer (B) is incorrect. The mix variance is
$388.50 favorable. Answer (D) is incorrect. The mix variance
reversed is $388.50 unfavorable.
44. The efficiency variance for either direct labor or
materials can be divided into
A. Spending variance and yield variance.
B. Yield variance and price variance.
C. Volume variance and mix variance.
D. Yield variance and mix variance.
45. A materials or labor mix variance equals
A. The actual total quantity of inputs times the
difference between the weighted-average
budgeted price for inputs and the weightedaverage expected price for inputs.
B. The actual total quantity of inputs times the
difference between the weighted-average
budgeted price for inputs and the weightedaverage actual price for inputs.
C. The budgeted total quantity of inputs times the
difference between the weighted-average
budgeted price for inputs and the weightedaverage expected price for inputs.
Answer (D) is correct. (CMA, adapted)
REQUIRED: The components into which a direct labor or
materials efficiency variance can be divided.
DISCUSSION: A direct labor or materials efficiency variance
is calculated by multiplying the difference between standard and
actual usage times the standard cost per unit of input. The
efficiency variances can be divided into yield and mix variances.
Mix and yield variances are calculated only when the production
process involves combining several materials or classes of labor
in varying proportions (when substitutions are allowable in
combining resources).
Answer (A) is incorrect. A spending variance is not the same
as an efficiency variance. Answer (B) is incorrect. A price
variance is not the same as an efficiency variance. Answer (C) is
incorrect. A volume variance is based on fixed costs, and an
efficiency variance is based on variable costs.
Answer (A) is correct. (Publisher, adapted)
REQUIRED: The definition of the materials mix variance.
DISCUSSION: Mix and yield variances are the components
of the usage (quantity or efficiency) variance. Mix and yield
variances can only be calculated when inputs are substitutable.
The mix variance isolates the effects of changes in the mix of
inputs used. The mix variance equals actual total quantity (ATQ)
times the weighted-average standard price (WASP) minus the
weighted-average expected price (WAEP).
Answer (B) is incorrect. The weighted-average actual price
is not used in calculating the mix variance. Answer (C) is
incorrect. The budgeted total quantity of inputs is used in
calculating the yield variance but not the mix variance.
Answer (D) is incorrect. The weighted-average actual price is not
used in calculating the mix variance.
D. The actual total quantity of inputs times the
difference between the weighted-average
actual price for inputs and the weightedaverage expected price for inputs.
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359
SU 7: Cost and Variance Measures
Questions 46 through 48 are based on the following information. Mountain View Hospital (MVH) has adopted a standard
cost accounting system for evaluation and control of nursing labor. Diagnosis Related Groups (DRGs), instituted by the
U.S. government for health insurance reimbursement, are used as the output measure in the standard cost system. A
DRG is a patient classification scheme in which hospitals are regarded as multiproduct firms with inpatient treatment
procedures related to the numbers and types of patient ailments treated. MVH has developed standard nursing times for
the treatment of each DRG classification, and nursing labor hours are assumed to vary with the number of DRGs treated
within a time period. The nursing unit on the fourth floor treats patients with four DRG classifications. The unit is staffed
with registered nurses (RNs), licensed practical nurses (LPNs), and aides. The standard nursing hours and salary rates
and actual numbers of patients for the month of May were as follows:
DRG
Classification
1
2
3
4
No. of
Patients
250
90
240
140
Standard Hours per DRG
RN
LPN
Aide
6
4
5
26
16
10
10
5
4
12
7
10
Total Standard Hours
RN
LPN
Aide
1,500
1,000
1,250
2,340
1,440
900
2,400
1,200
960
1,680
980
1,400
7,920
4,620
4,510
Standard Hourly Rates
RN
$12.00
LPN
8.00
Aide
6.00
The results of operations during May for the fourth floor nursing unit are presented below:
Actual hours
Actual salary
Actual hourly rate
RN
8,150
$100,245
$12.30
LPN
4,300
$35,260
$8.20
Aide
4,400
$25,300
$5.75
Because MVH does not have data to calculate variances by DRG, it uses a flexible budgeting approach to calculate labor
variances for each reporting period by labor classification (RN, LPN, Aide). Labor mix and labor yield variances are also
calculated because one labor input can be substituted for another. The variances are used by nursing supervisors and
hospital administration to evaluate the performance of nurses.
46. What is the direct labor static budget variance?
A. $2,205 favorable.
B. $2,205 unfavorable.
C. $1,745 favorable.
D. $1,745 unfavorable.
Answer (D) is correct. (Publisher, adapted)
REQUIRED: The total flexible budget variance.
DISCUSSION: The static budget variance (i.e., the total
variance to be explained) is the difference between the standard
cost of labor and the actual cost of labor. Based on the standard
hours and rates given, the standard cost of labor is $159,060
[(7,920 RN × $12.00) + (4,620 LPN × $8.00) + (4,510 Aide ×
$6.00)]. The actual cost of labor is $160,805 ($100,245 RN +
$35,260 LPN + $25,300 Aide). The static budget variance is thus
$1,745 unfavorable ($159,060 standard – $160,805 actual).
Answer (A) is incorrect. Reversing the order of subtraction
for the labor rate variance results in $2,205 favorable.
Answer (B) is incorrect. The labor rate variance is $2,205
unfavorable. Answer (C) is incorrect. Reversing the order of
subtraction results in $1,745 favorable.
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360
SU 7: Cost and Variance Measures
47. What is the labor mix variance?
A. $460 unfavorable.
B. $460 favorable.
C. $1,406 unfavorable.
D. $1,406 favorable.
Answer (C) is correct. (Publisher, adapted)
REQUIRED: The labor mix variance.
DISCUSSION: To enable the calculation of the mix
variance, the weighted-average expected price (WAEP) and
weighted-average standard price (WASP) must be derived.
Mountain View can calculate its WAEP and WASP for the month
as follows:
Labor
Class
AQ
SP
RN
8,150
× $12.00
LPN
4,300
×
8.00
Aide
4,400
×
6.00
Totals
16,850
Divided by: total hours
WAEP per hour
Labor
Class
SQ
SP
RN
7,920
× $12.00
LPN
4,620
×
8.00
Aide
4,510
×
6.00
Totals
17,050
Divided by: total hours
WASP per hour
=
=
=
=
=
=
Middle
Budget
$ 97,800
34,400
26,400
$158,600
÷ 16,850
$9.41246
Static
Budget
$ 95,040
36,960
27,060
$159,060
÷ 17,050
$9.32903
The mix variance can now be calculated:
Labor mix variance =
=
=
=
ATQ × (WASP – WAEP)
16,850 hours × ($9.32903 – $9.41246)
16,850 hours × –$0.08343
$1,406 unfavorable
Answer (A) is incorrect. The labor efficiency variance is
$460 favorable. Answer (B) is incorrect. The labor efficiency
variance is $460 favorable. Answer (D) is incorrect. The
variance was unfavorable.
48. What is the labor yield variance?
A. $1,866 unfavorable.
B. $1,866 favorable.
C. $1,406 unfavorable.
D. $1,406 favorable.
Answer (B) is correct. (Publisher, adapted)
REQUIRED: The labor yield variance.
DISCUSSION: To enable the calculation of the yield
variance, the weighted-average standard price (WASP) must be
derived. Mountain View can calculate its WASP for the month as
follows:
Labor
Class
SQ
RN
7,920
×
LPN
4,620
×
Aide
4,510
×
Totals
17,050
Divided by: total hours
WASP per hour
SP
$12.00
8.00
6.00
=
=
=
Static
Budget
$ 95,040
36,960
27,060
$159,060
÷ 17,050
$9.32903
The yield variance can now be calculated:
Labor yield variance =
=
=
=
(STQ – ATQ) × WASP
(17,050 hours – 16,850 hours) × $9.32903
200 hours × $9.32903
$1,866 favorable
Answer (A) is incorrect. The yield variance is favorable.
Answer (C) is incorrect. The labor mix variance is $1,406
favorable. Answer (D) is incorrect. The labor mix variance is
$1,406 favorable.
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361
SU 7: Cost and Variance Measures
Questions 49 and 50 are based on the following
information. Tamsin Company’s standard direct
labor rates in effect for the fiscal year ending June
30 and standard hours allowed for the output in
April are as follows:
Labor class III
Labor class II
Labor class I
Standard DL
Rate per Hour
$8.00
7.00
5.00
Standard DLH
Allowed for Output
500
500
500
The wage rates for each labor class increased
January 1 under the terms of a new union contract.
The standard wage rates were not revised. The
actual direct labor hours (DLH) and the actual direct
labor rates for April were as follows:
Labor class III
Labor class II
Labor class I
Actual Rate
$8.50
7.50
5.40
Actual DLH
550
650
375
49. What is the direct labor yield variance (rounded)
for Tamsin?
A. $500 unfavorable.
B. $325 unfavorable.
C. $825 unfavorable.
D. $325 favorable.
Answer (A) is correct. (Publisher, adapted)
REQUIRED: The direct labor yield variance for April.
DISCUSSION: To enable the calculation of the yield
variance, the weighted-average standard price (WASP) must be
derived. Tamsin can calculate its WASP for the month as
follows:
Labor
Class
SQ
III
500
×
II
500
×
I
500
×
Totals 1,500
Divided by: total hours
WASP per hour
SP
$8.00
7.00
5.00
=
=
=
Static
Budget
$ 4,000
3,500
2,500
$ 10,000
÷ 1,500
$6.66667
The yield variance can now be calculated:
Labor yield variance =
=
=
=
(STQ – ATQ) × WASP
(1,500 hours – 1,575 hours) × $6.66667
–75 hours × $6.66667
$500 unfavorable
Answer (B) is incorrect. The direct labor mix variance is
$325 unfavorable. Answer (C) is incorrect. The direct labor
efficiency variance is $825 unfavorable. Answer (D) is incorrect.
Reversing the order of subtraction for the mix variance results in
$325 favorable.
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362
SU 7: Cost and Variance Measures
50. What is the direct labor mix variance (rounded)
for Tamsin?
A. $500 unfavorable.
B. $325 unfavorable.
C. $325 favorable.
D. $500 favorable.
Answer (B) is correct. (Publisher, adapted)
REQUIRED: The direct labor mix variance for April.
DISCUSSION: To enable the calculation of the mix
variance, the weighted-average expected price (WAEP) and
weighted-average standard price (WASP) must be derived.
Tamsin can calculate its WAEP and WASP for the month as
follows:
Labor
Class
AQ
III
550
×
II
650
×
I
375
×
Totals 1,575
Divided by: total hours
WAEP per hour
Labor
Class
SQ
III
500
×
II
500
×
I
500
×
Totals 1,500
Divided by: total hours
WASP per hour
SP
$8.00
7.00
5.00
SP
$8.00
7.00
5.00
=
=
=
=
=
=
Middle
Budget
$ 4,400
4,550
1,875
$ 10,825
÷ 1,575
$6.87302
Static
Budget
$ 4,000
3,500
2,500
$ 10,000
÷ 1,500
$6.66667
The mix variance can now be calculated:
Labor mix variance =
=
=
=
ATQ × (WASP – WAEP)
1,575 hours × ($6.66667 – $6.87302)
1,575 hours × –$0.20635
$325 unfavorable
Answer (A) is incorrect. The yield variance is $500
unfavorable. Answer (C) is incorrect. The mix variance is $325
unfavorable. Answer (D) is incorrect. Reversing the order of
subtraction for the yield variance results in $500 favorable.
51. A materials or labor yield variance equals
A. The difference between the standard total
quantity of inputs and the actual total quantity
of inputs times the weighted-average expected
price for inputs.
B. The actual total quantity of inputs times the
difference between the weighted-average
budgeted price for inputs and the weightedaverage expected price for inputs.
C. The difference between the standard total
quantity of inputs and the actual total quantity
of inputs times the weighted-average actual
price for inputs.
Answer (D) is correct. (Publisher, adapted)
REQUIRED: The definition of materials yield variance.
DISCUSSION: Mix and yield variances are the components
of the usage (quantity or efficiency) variance. Mix and yield
variances can only be calculated when inputs are substitutable.
The yield variance measures how efficiently the actual mix of
inputs was used to produce the given output. The yield variance
equals standard total quantity (STQ) minus the actual total
quantity (ATQ) times the weighted-average standard price
(WASP).
Answer (A) is incorrect. The weighted-average expected
price for inputs is used in calculating the mix variance but not the
yield variance. Answer (B) is incorrect. This is the formula for
the mix variance. Answer (C) is incorrect. The weightedaverage actual price for inputs is not used in calculating the mix
and yield variances.
D. The difference between the standard total
quantity of inputs and the actual total quantity
of inputs times the weighted-average budgeted
price for inputs.
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Page 9 of 9
Top of page 378: This corrects a typo; Unfavorable should be Favorable.
Essay Questions 1, 2 — Unofficial Answers
1. Total direct materials variance:
Static budget (SQ × SP): 4,000 bottles × $13.00
Less: actual cost
Static budget variance
= $ 52,000
(51,710)
$ 290 U F
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