The standard cost of a chemical mixture is as follows: 60% of Material A @ USD 50 per kg 40% of Material B @ USD 60 per kg per kg A stand loss of 25% on output is expected in production. The cost records for a period has shown the following usage. 540 kg of Material A @ USD 60 260 kg of Material B @ USD 50 per kg The quantity processed was 680 kgs of good product. From the above given information, calculate: (i) Material Cost Variance Material Price Variance (iii) Material Efficiency Variance (iv) Material Mix Variance (v) Material Yield Variance

Std. cost of actual output = 43200/600*680 = 48960

Part 1

Materials cost variance = (Std. cost of actual output – Actual cost) = 48960-45400 = $3560 Favorable

Part 2

Materials price variance =(SP – AP) × AQ

Materials A = (50-60)*540=5400 Unfavorable

Materials B = (60-50)*260= 2600 Favorable

Total materials price variance = 5400 Unfavorable + 2600 favorable = 2800 Unfavorable

Part 3

Materials usage variance = (Std. Quantity for actual output – Actual Quantity) × Std. Price

Materials A =( (480/600*680)-540)*50 =200 F

Materials B = ((320/600*680)-260)*60=6160 F

Total materials usage variance = 200 favorable +6160 favorable = $6360 favorable

Part 4

Materials mix variance = standard cost of standard mix - standard cost of actual mix = 43200-48960 = $5760 Unfavorable

materials yield variance = standard yield rate *(Actual yield - standard yield) = (43200/600)*(680-600) = 5760 Unfavorable