Question

7. (1) During the month of January, 1,000 pounds of materials were purchased at a cost of $95 per pound. If there was a favorable direct materials price variance of $10,000, the standard cost per pound must be (2) XYZ Co. uses two types of materials in the production. The following standards were developed: Material Standard Mix Standard Unit Price Standard Cost M1 2 units $20 per unit $ 40 M2 3 units 12 per unit $36 Yield 25 units During January, the following actual production information was provided: Material Actual Mix M1 22,000 units M2 43,000 units Yield 320,000 units Determine the mix variance and the yield variance.

NOTE: the correct answers are...

1.) 105

2.)mix variance=32,000F

3.)yield variance=15,200U

HOWEVER, I am more concerned with how to solve the problem. please show all steps and work. Thank you!

Answer 1

1. The formula for calculating material price varience is (standard price - actual price) x Actual consumption,
   1. Substituting the values in the formula, 10,000 = (standard price - 95) x 1000 pounds,
   2. Therefore standard price = (10,000 ÷ 1,000) + 95 = 105.
2. Calculation of basic data,
   1. 25 units of output requires 2 units of M1 and 3 units of M2, 320,000 units of output must be obtained from 320,000 ÷ 25 x 2 = 25,600 units of M1 and 320,000 ÷ 25 x 3 = 38,400 units of M2. (Basic maths calculation).
   2. Revised standard quantity is the total actual quantity that is actually consumed in standard ratio of 2:3 that is 22000 + 43000 = 65,000 in 2:3 that is 26,000 and 39,000.
   3. Yield varience = (standard quantity (step-1) - revised standard quantity (step-2)) x standard price,
      1. M1 = (25,600 - 26,000) x 20 = 8,000 U,
      2. M2 = ( 38,400 - 39,000) x 12 = 7,200 U.
      3. Therefore Yield varience = 8000 U + 7200 U = 15,200 U
   4. Mix varience = (revised standard quantity (step-2) - actual quantity) x standard price,
      1. M1 = (26,000 - 22,000) x 20 = 80,000 F,
      2. M2 = (39,000 - 43,000) x 12 = 48000 U,
      3. Therefore Mix varience = 80,000 F + 48,000 U = 32,000 F.