Question

Davis Division uses two raw materials-X33 and 242-to produce its product called Base 23, a chemical base for interior house paint. The materials are mixed in the following standard proportions to yield 100 litres of Base 23: Quantity (litres) Material X33 242 Cost per Litre $ 1 $ 5 80 20 It requires 5 hours of direct labour at $15 per hour to produce 100 litres of Base 23. On average, the division can produce and sell 20,000 litres of Base 23 per month. In a recent month, the division used th following amounts of materials and labour to produce 18,000 litres of Base 23: Material X33 242 Quantity (litres) 16,200 5,400 Total Actual Cost 16,200 27,500 $ 21,600 $ 43,700 Direct labour 1,050 hours $ 15,750 Required: 1. Calculate the following materials variances for Base 23: (Do not round intermediate computations. Round final computations to nearest whole dollar. Indicate the effect of each variance by selecting "F" for favourable, "U" for unfavourable, and "None" for no effect (i.e., zero variance).)

Answer 1

80% Satndard Mix per 100 units X33 80 litres 242 20 litres 100 20% L 21600 litres Actual Units (litres) = 16200 + 5400 = Actual Units in Standard Mix X33 80% 17280 litres 242 20% 4320 litres 21600 litres Material Mix Variance (Actual units used at Standard Mix - Actual units used at actual mix) x Standard Unit Price = = es x $1 = $1,080.00 F X33 242 (17280 - 16200) $1 (4320 - 5400) < $5 1080 litres x $1 = 1080 litres x $5 = $5,400.00 $4,320.00 u Qty (liters) 80 X33 Z42 Rate Product 1.00 $ 80.00 5.00 $ 100.00 $ 180.00 $ $ 20 100 Standard Output = 100 litres Standard Cost per output = $180 / 100 = $ 1.80 Input Output % = 100% Therefore, Standard Output on Input og 21600 litres should be 21600 litres Material Yield Variance = (Actual Yield - Standard Yield) x Standard Cost per unit produced (20000 litres - 21600 litres) $1.80 $ 2,880.00 U Material Mix Variance Material Yield Variance $ 4,320.00 U $ 2,880.00 U

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