Page 282 - PM Integrated Workbook 2018-19

Chapter 10

Example 5

Hondru operates a standard costing system.

The standard direct materials to produce 1,000 units of output is as follows:

Material Grade Input quantity Standard price per kg
(kgs) ($)
A 600 1.10
B 240 2.40

C 360 1.50
During April, the actual output of the product was 21,000 units. The actual
materials issued to production were:

Material Grade Quantity (kgs)
A 14,000
B 5,500

C 5,500

Calculate the material yield variance. Comment on the figures calculated.

(1)

Total input of 25,000 kgs should produce 20,833 units of output
(@ 1.2 kgs per unit)

(2) 25,000 kgs did produce 21,000 units of output

(3) Difference = yield variance in units 167 units favourable

(4) Value at the standard cost of (working) $1.78 per unit
(5) Yield variance $297 favourable

Working

Standard cost per unit = ((600 × $1.10) + (240 × $2.40) + (360 × $1.50))/
1,000 units = $1.78 per unit.

The favourable variance is due to more output being achieved than was
expected from the materials input.

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